Document:

Exhibit 10.1 

EXECUTION VERSION  

STOCK
PURCHASE AGREEMENT

by and among

THE MARLIN FIREARMS COMPANY,

REMINGTON ARMS COMPANY, INC., as Buyer

THE SHAREHOLDERS OF THE MARLIN FIREARMS
COMPANY PARTY HERETO, as Sellers

and the

SHAREHOLDERS’ REPRESENTATIVE

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 1
  SALE OF THE SHARES AND CLOSING

	
1

	
 

	
 

	
 

	
1.1

	
 

	
Sale and
  Purchase of the Shares

	
1

	
 

	
1.2

	
 

	
Closing

	
1

	
 

	
1.3

	
 

	
Subsequent
  Actions

	
2

	
 

	
1.4

	
 

	
Lost
  Certificates

	
3

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 2
  RETIREMENT UNDERFUNDING ADJUSTMENT

	
3

	
 

	
 

	
 

	
2.1

	
 

	
Closing
  Retirement Underfunding

	
3

	
 

	
2.2

	
 

	
Disagreement
  and Resolution

	
3

	
 

	
2.3

	
 

	
Adjustment
  to Retirement Underfunding

	
4

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 3
  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

	
5

	
 

	
 

	
 

	
3.1

	
 

	
Authority
  and Enforceability

	
5

	
 

	
3.2

	
 

	
Conflicts

	
5

	
 

	
3.3

	
 

	
Capitalization

	
6

	
 

	
3.4

	
 

	
Business
  Involvement

	
6

	
 

	
 

	
ARTICLE 4
  REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY AND THE
     
           
      COMPANY SUBSIDIARY

	
6

	
 

	
 

	
 

	
4.1

	
 

	
Organization
  and Power

	
6

	
 

	
4.2

	
 

	
Authority
  and Enforceability

	
6

	
 

	
4.3

	
 

	
Conflicts

	
7

	
 

	
4.4

	
 

	
Capitalization

	
7

	
 

	
4.5

	
 

	
Financial
  Statements

	
8

	
 

	
4.6

	
 

	
No
  Undisclosed Liabilities

	
8

	
 

	
4.7

	
 

	
Operations
  Since the Most Recent Audited Balance Sheet Date

	
9

	
 

	
4.8

	
 

	
Taxes

	
11

	
 

	
4.9

	
 

	
Permits

	
13

	
 

	
4.10

	
 

	
Real
  Property

	
13

	
 

	
4.11

	
 

	
Intellectual
  Property

	
14

	
 

	
4.12

	
 

	
Compliance
  with Laws

	
15

	
 

	
4.13

	
 

	
Contracts

	
15

	
 

	
4.14

	
 

	
Status of
  Contracts

	
17

	
 

	
4.15

	
 

	
Employee
  Benefits

	
17

	
 

	
4.16

	
 

	
Environmental
  Compliance

	
19

	
 

	
4.17

	
 

	
Employee
  Relations and Agreements

	
21

	
 

	
4.18

	
 

	
Litigation

	
21

	
 

	
4.19

	
 

	
Insurance

	
22

	
 

	
4.20

	
 

	
Suppliers
  and Customers

	
22

	
 

	
4.21

	
 

	
Accounts
  Receivable

	
23

i

	
 

	
 

	
 

	
 

	
 

	
 

	
4.22

	
 

	
Properties

	
23

	
 

	
4.23

	
 

	
Bank
  Accounts

	
23

	
 

	
4.24

	
 

	
Powers of
  Attorney; Guarantees

	
24

	
 

	
4.25

	
 

	
Transactions
  with Affiliates

	
24

	
 

	
4.26

	
 

	
Inventory

	
24

	
 

	
4.27

	
 

	
Corrupt
  Practices

	
24

	
 

	
4.28

	
 

	
Books and
  Records

	
25

	
 

	
4.29

	
 

	
Product
  Liabilities and Product Warranties

	
25

	
 

	
4.30

	
 

	
Waiver and
  Termination of the Stockholders Agreement

	
25

	
 

	
4.31

	
 

	
Vintage
  Firearms Value

	
25

	
 

	
4.32

	
 

	
No Brokers

	
25

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 5
  REPRESENTATIONS AND WARRANTIES OF BUYER

	
25

	
 

	
 

	
 

	
5.1

	
 

	
Organization
  of Buyer

	
25

	
 

	
5.2

	
 

	
Authority of
  Buyer

	
26

	
 

	
5.3

	
 

	
No Violation
  of Law and Agreements

	
26

	
 

	
5.4

	
 

	
No
  Litigation or Regulatory Action

	
26

	
 

	
5.5

	
 

	
Financial
  Ability

	
26

	
 

	
5.6

	
 

	
Solvency

	
26

	
 

	
5.7

	
 

	
Independent
  Analysis

	
27

	
 

	
5.8

	
 

	
Investment
  Intention

	
27

	
 

	
5.9

	
 

	
No Brokers

	
27

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 6
  ACTIONS PRIOR TO THE CLOSING DATE

	
27

	
 

	
 

	
 

	
6.1

	
 

	
Consents of
  Third Parties; Governmental Approvals

	
27

	
 

	
6.2

	
 

	
Operations
  Prior to the Closing Date

	
28

	
 

	
6.3

	
 

	
Commercially
  Reasonable Efforts

	
30

	
 

	
6.4

	
 

	
Confidentiality;
  Access to Information

	
30

	
 

	
6.5

	
 

	
Notification
  of Certain Matters

	
31

	
 

	
6.6

	
 

	
No Solicitations

	
31

	
 

	
6.7

	
 

	
Financing
  Assistance

	
31

	
 

	
6.8

	
 

	
Indebtedness

	
32

	
 

	
6.9

	
 

	
International
  Boycott Report

	
32

	
 

	
6.10

	
 

	
Pension Plan

	
32

	
 

	
6.11

	
 

	
No Transfers

	
32

	
 

	
6.12

	
 

	
Information
  Return on Foreign Corporation Ownership

	
32

	
 

	
6.13

	
 

	
Distributions

	
32

	
 

	
 

	
ARTICLE 7
  POST-CLOSING AGREEMENTS

	
33

	
 

	
 

	
 

	
7.1

	
 

	
Employees,
  Employee Benefits, Hiring of Employees

	
33

	
 

	
7.2

	
 

	
Indemnification
  and Insurance

	
34

	
 

	
7.3

	
 

	
Other Tax
  Matters

	
34

	
 

	
7.4

	
 

	
Management
  Amount and Expense Amount

	
35

	
 

	
7.5

	
 

	
Vintage
  Firearms

	
36

	
 

	
7.6

	
 

	
Environmental

	
36

ii

	
 

	
 

	
 

	
 

	
 

	
ARTICLE 8
  CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

	
37

	
 

	
 

	
 

	
8.1

	
 

	
No
  Misrepresentation or Breach of Covenants and Warranties

	
37

	
 

	
8.2

	
 

	
No
  Injunction

	
37

	
 

	
8.3

	
 

	
Required
  Consents

	
37

	
 

	
8.4

	
 

	
Escrow
  Agreement

	
37

	
 

	
8.5

	
 

	
Trademark
  Agreement

	
37

	
 

	
8.6

	
 

	
Laws

	
37

	
 

	
8.7

	
 

	
Parachute
  Payments

	
37

	
 

	
8.8

	
 

	
Release of
  Liens

	
38

	
 

	
8.9

	
 

	
Resignation
  of Directors

	
38

	
 

	
8.10

	
 

	
Non-Competition
  Agreement

	
38

	
 

	
8.11

	
 

	
Waiver and
  Termination Agreement

	
38

	
 

	
8.12

	
 

	
Waiver

	
38

	
 

	
 

	
ARTICLE 9
  CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY

	
38

	
 

	
 

	
 

	
9.1

	
 

	
No
  Misrepresentation or Breach of Covenants and Warranties

	
38

	
 

	
9.2

	
 

	
Required
  Consents

	
39

	
 

	
9.3

	
 

	
No
  Injunction

	
39

	
 

	
9.4

	
 

	
Escrow
  Agreement

	
39

	
 

	
9.5

	
 

	
Trademark
  Agreement

	
39

	
 

	
9.6

	
 

	
Laws

	
39

	
 

	
 

	
ARTICLE 10
  INDEMNIFICATION

	
39

	
 

	
 

	
 

	
10.1

	
 

	
Indemnification
  by the Sellers

	
39

	
 

	
10.2

	
 

	
Indemnification
  by Buyer

	
40

	
 

	
10.3

	
 

	
Tax
  Indemnification

	
40

	
 

	
10.4

	
 

	
Notice of
  Claims

	
41

	
 

	
10.5

	
 

	
Third Person
  Claims

	
41

	
 

	
10.6

	
 

	
Limitations

	
42

	
 

	
10.7

	
 

	
Mitigation

	
43

	
 

	
10.8

	
 

	
Subrogation

	
43

	
 

	
10.9

	
 

	
No Offset

	
43

	
 

	
 

	
ARTICLE 11
  TERMINATION

	
43

	
 

	
 

	
 

	
11.1

	
 

	
Termination

	
43

	
 

	
 

	
ARTICLE 12
  GENERAL PROVISIONS

	
45

	
 

	
 

	
 

	
12.1

	
 

	
Shareholders’
  Representative

	
45

	
 

	
12.2

	
 

	
Survival of
  Covenants, Representations and Warranties

	
46

	
 

	
12.3

	
 

	
No Public
  Announcement

	
46

	
 

	
12.4

	
 

	
Notices

	
46

	
 

	
12.5

	
 

	
Successors
  and Assigns

	
48

	
 

	
12.6

	
 

	
Access to
  Records and Employees after Closing

	
48

iii

	
 

	
 

	
 

	
 

	
 

	
 

	
12.7

	
 

	
Entire
  Agreement

	
49

	
 

	
12.8

	
 

	
Interpretation

	
49

	
 

	
12.9

	
 

	
Amendments
  and Waivers

	
50

	
 

	
12.10

	
 

	
Expenses

	
50

	
 

	
12.11

	
 

	
Partial
  Invalidity

	
50

	
 

	
12.12

	
 

	
Execution in
  Counterparts; Facsimile

	
50

	
 

	
12.13

	
 

	
Governing
  Law

	
51

	
 

	
12.14

	
 

	
Consent to
  Jurisdiction; Waiver of Jury Trial

	
51

	
 

	
12.15

	
 

	
Disclaimer
  of Warranties

	
51

	
 

	
12.16

	
 

	
Time of
  Essence

	
51

	
 

	
12.17

	
 

	
References
  to U.S. Dollars

	
51

	
 

	
12.18

	
 

	
Further
  Assurances

	
51

	
 

	
12.19

	
 

	
Release

	
52

	
 

	
12.20

	
 

	
No
  Rescission

	
53

	
 

	
12.21

	
 

	
Conflict of
  Interest

	
53

	
 

	
 

	
ARTICLE 13
  DEFINITIONS

	
53

	
 

	
 

	
 

	
13.1

	
 

	
Definitions

	
53

	
 

	
13.2

	
 

	
Index of
  Defined Terms

	
59

	
 

	
 

	
 

	
 

	
Annex A

	
 

	
Retirement
  Underfunding Methods and Assumptions

	
 

	
 

	
 

	
 

	
 

	
 

	
Exhibit A:

	
 

	
Escrow
  Agreement

	
 

	
Exhibit B:

	
 

	
Waiver and
  Termination Agreement

	
 

	
Exhibit C:

	
 

	
Trademark
  Coexistence Agreement

	
 

	
Exhibit D:

	
 

	
Non-Competition
  Agreement

	
 

iv

STOCK PURCHASE AGREEMENT

                    THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of December 21, 2007, by
and among The Marlin Firearms Company, a Connecticut corporation (the “Company”), Remington
Arms Company, Inc., a Delaware corporation (“Buyer”), the shareholders of the Company,
listed on the signature pages hereto, whether such signature page is delivered
on the date hereof or at any time prior to the Closing (as defined below)
(each, a “Seller”
and collectively, the “Sellers”) and Frank Kenna, III, solely in his capacity
as the Shareholders’ Representative (as described and defined in
Section 12.1).  Buyer, the Company,
the Sellers and the Shareholders’ Representative are sometimes collectively
referred to as the “Parties.”  

RECITALS

                    A.          WHEREAS,
the Sellers (assuming each shareholder of the Company has executed this Agreement)
own all of the issued and outstanding shares of capital stock of the Company
consisting of 86,773 shares of Class A Common Stock and 760,936 shares of  Class B Common Stock (the
“Shares”); and 

                    B.          WHEREAS,
the Sellers desire to sell, and Buyer desires to purchase, the Shares on the
terms and subject to the conditions set forth in this Agreement. 

AGREEMENT

                    NOW,
THEREFORE, in consideration of the foregoing, the representations, warranties
and agreements herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound hereby, the Parties agree as follows (Section 13.1 contains
definitions of certain terms used in this Agreement, and Section 13.2
contains an index of other terms defined elsewhere in this Agreement):

ARTICLE 1

SALE OF THE SHARES AND CLOSING

                    1.1          Sale
and Purchase of the Shares.  Upon
the terms and subject to the conditions set forth in this Agreement, at the
Closing, each Seller will sell to Buyer, and Buyer will purchase from each
Seller, all of the right, title and interest of such Seller in and to the
number of Shares set forth opposite such Seller’s name on Schedule 1.1.

                    1.2          Closing.

                                   (a)          The
closing of the sale and purchase of the Shares (the “Closing”) shall be consummated on the third
(3rd) Business Day after the conditions set forth in Articles 8 and 9
(other than actions to be taken or items to be delivered at the Closing) have
been satisfied or waived, at the offices of Wiggin and Dana LLP (“Wiggin and Dana”),
450 Lexington Avenue, New York, New York, or at such other place and time as
shall be agreed upon by Buyer and the Company; provided, that Buyer may
extend such date for up to ten (10) Business Days, in order to complete the
Acquisition Financing (such that the financing closing can occur 

1

simultaneously
with the Closing).  The time and date on
which the Closing is actually held is referred to herein as the “Closing Date.”

                                   (b)          At
the Closing, each Seller will deliver to Buyer, free and clear of all
Encumbrances, certificates representing all of the Shares set forth opposite
such Seller’s name on Schedule 1.1, duly endorsed in blank and bearing
or accompanied by all requisite stock transfer stamps.  

                                   (c)          At
the Closing, Buyer shall deposit with the Escrow Agent cash in an amount equal
to Five Million Two Hundred Thousand Dollars ($5,200,000) (the “Escrow Amount”).  The Escrow Amount shall be
held and released
by the Escrow Agent in accordance with the Escrow Agreement substantially in
the form of Exhibit A hereto, to be executed at the Closing by
Buyer, the Shareholders’ Representative and the Escrow Agent (the “Escrow Agreement”).

                                   (d)          At
the Closing, Buyer shall deliver to each Seller by wire transfer of immediately
available funds to an account designated by such Seller in writing to Buyer at
least three (3) Business Days prior to the Closing, an amount equal to such
Seller’s portion of the Base Amount, determined in accordance with the
percentage of the Shares held by such Seller, as set forth on Schedule 1.1,
minus such Seller’s portion of (i) the Escrow Amount and (ii) the Trust Amount,
in each case determined in accordance with the percentage of the Shares held by
such Seller, as set forth on Schedule 1.1.    

                                   (e)          The
Company shall deliver to Buyer on the date that is three (3) Business Days
prior to the Closing a statement signed by an officer of the Company (such
statement, the “Expense Statement”)
setting forth all costs, fees and expenses of the Company and the Company
Subsidiary paid, payable, or incurred since January 1, 2007 in connection with
the transactions contemplated hereby (including a reasonable estimate of all
costs, fees and expenses paid, payable, or incurred through the Closing Date),
including, without limitation, the costs, fees and expenses paid, payable, or
incurred in connection with (i) the sale process relating to the Company,
(ii) the drafting and negotiating of the letter of intent between Cerberus
Capital Management, LP and the Company, dated July 24, 2007 and this
Agreement, the Schedules and all other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and (iii) accounting,
actuarial, legal and financial advisors with respect to the foregoing (the
aggregate of such costs, fees and expenses, the “Expense Amount”).  The Expense Statement shall also (A)
describe any payments made
to partially fund any underfunding under Pension Plans from the date hereof
until the Closing Date (B) set forth a detailed calculation of the Management
Amount and (C) set forth the amount of the December Dividend, however it is
acknowledged that neither of the foregoing are to be included in the Expense
Amount.  The Expense Amount shall not
include any allocation for the time of employees of the Company. 

                    1.3          Subsequent
Actions. At any time or from time to
time after the Closing, the Sellers shall execute and deliver to Buyer such
other documents and instruments, provide such materials and information and
take such other actions as Buyer may reasonably request to more effectively
vest title to the Shares in Buyer and, to the full extent permitted by Law, to
put Buyer in actual possession and operating control of the Company and the
Company Subsidiary, and  

2

otherwise to
cause Seller to fulfill its obligations under this Agreement and the Escrow
Agreement.

                    1.4          Lost
Certificates. If any certificate
representing Shares shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the Seller claiming such certificate to be
lost, stolen or destroyed, and an agreement by such Seller to indemnify against
any claim that shall be made against the Company or Buyer with respect to such
certificate, the Company shall deliver to such Seller a new certificate in
exchange for such lost, stolen or destroyed certificate so that such new
certificate can be delivered to Buyer at the Closing pursuant to Section
1.2(b). 

ARTICLE 2

RETIREMENT UNDERFUNDING ADJUSTMENT 

                    2.1          Closing
Retirement Underfunding. Within the sixty (60) day period following the
Closing Date, Buyer shall prepare and deliver to the Shareholders’
Representative a statement (the “Closing Retirement Underfunding Statement”) setting
forth the amount of any Retirement Underfunding as of the close of business on
the date immediately preceding the Closing Date (the “Closing Retirement Underfunding”) which
statement shall identify the specific items involved and the dollar amount
thereof and provide reasonable supporting documentation therefore. The Closing Retirement Underfunding
Statement will be prepared by Buyer’s actuarial consultants using the methods
and assumptions set forth on Annex A hereto and such consultants
shall keep Sellers’ actuarial consultants reasonably informed as they prepare
the Closing Retirement Underfunding Statement.
In connection with, and to facilitate their preparation of, the Closing
Retirement Underfunding Statement, the Company shall, from and after the date
hereof, provide to Buyer and Buyer’s actuarial consultants reasonable access
during normal business hours to all relevant books and records and personnel of
the Company and the Company Subsidiary, including without limitation, to all
census and other data in the format (paper or electronic) requested. After the Closing, in connection with and to
facilitate their review of the Closing Retirement Underfunding Statement, Buyer
shall provide to the Shareholders’ Representative and its actuarial consultants
reasonable access during normal business hours to all relevant books and
records and personnel of the Company and the Company Subsidiary. 

                    2.2          Disagreement
and Resolution.  

                                   (a)          If
the Shareholders’ Representative disagrees with the Closing Retirement
Underfunding as set forth in the Closing Retirement Underfunding Statement
delivered pursuant to Section 2.1, the Shareholders’ Representative shall
notify Buyer in writing of such disagreement within thirty (30) days after
delivery of the Closing Retirement Underfunding Statement, which notice shall
describe the nature of any such disagreement in reasonable detail, identify the
specific items involved and the dollar amount of each such disagreement and
provide reasonable supporting documentation for each such disagreement.  After the end of such thirty (30) day
period, neither Buyer nor the Shareholders’ Representative may introduce
additional disagreements with respect to any item in the Closing Retirement
Underfunding Statement or increase the amount of any disagreement, and any item
not so identified shall be deemed to be agreed to by the Shareholders’
Representative and will be final and binding.
In the event that the Retirement Underfunding is less than the Estimated
Retirement Underfunding Amount, then within five (5) Business Days of the
expiration of such thirty (30) day period, Buyer shall pay to each Seller an
amount equal to such Seller’s portion,

3

as set forth
on Schedule 1.1, of any undisputed amounts of the excess, less a
reasonable estimate of such Seller’s share of the Actuarial Arbitrator (as
defined below) fees and expenses.

                                   (b)          If
Buyer and the Shareholders’ Representative are unable to resolve all
disagreements properly identified by the Shareholders’ Representative pursuant
to Section 2.2(a) within thirty (30) days after delivery to Buyer of
written notice of such disagreements, then such disagreements shall be
submitted for final and binding resolution to a Neutral Actuary to resolve such
disagreements (the “Actuarial Arbitrator”).  The Actuarial Arbitrator shall be a Neutral
Actuary selected by mutual agreement of Buyer and the Shareholders’
Representative; provided, that (i) if, within fifteen (15) days
after the Shareholders’ Representative has delivered its notice of disagreement
to Buyer pursuant to Section 2.2(a), the parties are unable to agree on a
Neutral Actuary to act as Actuarial Arbitrator, each party shall select a
Neutral Actuary and such firms together shall select the Neutral Actuary to act
as the Actuarial Arbitrator, and (ii) if any party does not select a
Neutral Actuary within ten (10) days of written demand therefor by the
other party, the Neutral Actuary selected by the other party shall act as the
Actuarial Arbitrator.  The Actuarial
Arbitrator will only consider those items and amounts set forth in the Closing
Retirement Underfunding Statement as to which Buyer and the Shareholders’
Representative have disagreed within the time periods and on the terms
specified above and must resolve the matter in accordance with the terms and
provisions of this Agreement.  The
Actuarial Arbitrator shall deliver to Buyer and the Shareholders’
Representative, as promptly as practicable and in any event within ninety
(90) days after its appointment, a written report setting forth the
resolution of any such disagreement determined in accordance with the terms of
this Agreement.  The Actuarial
Arbitrator may select a position other than those selected by Buyer or the
Shareholders’ Representative as a resolution for each item of disagreement; provided,
that, the Actuarial Arbitrator shall not assign a value to any item greater
than the greatest value for such item claimed by either the Shareholders’
Representative or Buyer or less than the smallest value for such item claimed
by either the Shareholders’ Representative or Buyer.  The Actuarial Arbitrator shall make its determination based
solely on presentations and supporting material provided by the parties and not
pursuant to any independent review.  The
determination of the Actuarial Arbitrator shall be final and binding.  Buyer, on the one hand, and the Sellers, on
the other, will share equally the fees and expenses of the Actuarial
Arbitrator.

                    2.3          Adjustment
to Retirement Underfunding.  If the
Closing Retirement Underfunding as finally determined in accordance with this
Article 2 is less than the Estimated Retirement Underfunding Amount, Buyer
shall pay, by wire transfer within five (5) Business Days of such final
determination, to each Seller an amount equal to such Seller’s portion as set
forth on Schedule 1.1 of such excess, less such Seller’s share of
the Actuarial Arbitrator fees and expenses, which shall be paid by Buyer; provided,
that such excess payable by Buyer shall not exceed the Estimated Retirement
Underfunding Amount. 

4

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

                    As
an inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, each Seller, severally and not jointly,
represents and warrants to Buyer as set forth below.

                    3.1     Authority
and Enforceability. Each Seller is either an individual or a trust and has
all requisite power and authority, and has taken all action necessary, to
execute and deliver this Agreement and to perform such Seller’s obligations
hereunder. In the case of a Seller that is a trust, the execution and delivery
by that Seller of this Agreement, and the performance by that Seller of its
obligations hereunder, has been duly and validly authorized by or on behalf of
such Seller and no other action on the part of such Seller is necessary. This
Agreement has been duly authorized, executed and delivered by each Seller and
constitutes the legal, valid and binding obligations of such Seller,
enforceable against such Seller in accordance with its terms subject to
bankruptcy, insolvency, reorganization, moratorium and similar Laws of general
application relating to or affecting creditors’ rights and to general equity
principles.

                    3.2     Conflicts.
The execution and delivery of this Agreement and the performance of a Seller’s
obligations hereunder and the consummation of the transactions contemplated
hereby, does not and will not:

                              (a)          in
the case of a Seller that is a trust, conflict with or result in a violation or
breach of any of the terms, conditions or provisions of the trust documents
applicable to such Seller;

                              (b)          in
the case of each Seller, conflict with or result in a violation or breach of
any term or provision of applicable Law; or

                              (c)          in
the case of each Seller:

	
 

	
 

	
 

	
 

	
                              (i)         require
 such Seller to obtain any consent, approval or action of, make any filing
 with or give any notice to any Person as a result or under the terms of;

	
 

	
 

	
 

	
                              (ii)        conflict
 with or result in a violation or breach of;

	
 

	
 

	
 

	
                              (iii)       constitute
 (with or without notice or lapse of time or both) a default under;

	
 

	
 

	
 

	
                              (iv)       result
 in or give to any Person any right of termination, cancellation, acceleration
 or modification in or with respect to;

	
 

	
 

	
 

	
                              (v)        result
 in or give to any Person any additional rights or entitlement to increased, additional,
 accelerated or guaranteed payments under; or

5

	
 

	
 

	
 

	
                              (vi)       result
 in the creation or imposition of any Encumbrance upon such Seller or any of
 their respective assets or properties under,

any Contract
or Permit to which such Seller is a party or by which any of its respective
assets or properties is bound, other than, in the case of clauses ((iv),(v) and
(vi)), as could not, individually or in the aggregate, be reasonably likely to
have a material adverse effect on such Seller’s ability to consummate the
transactions contemplated by this Agreement.

                    3.3     Capitalization.
Each Seller represents (a) that such Seller owns the number of Shares set
forth next to such Seller’s name on Schedule 1.1, (b) the
transactions contemplated hereby will not give rise to any preemptive rights or
rights of first refusal with respect to the Shares and (c) such Seller
does not otherwise have any rights with respect to the capital stock of the
Company.

                    3.4     Business
Involvement. Each Seller, other than the individuals set forth on Schedule
3.4, represents that such Seller is not actively involved in the
management, business or operations of the Company or the Company Subsidiary. 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY AND THE COMPANY 

SUBSIDIARY

                    As
an inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company and each of the Sellers,
severally and not jointly, represent and warrant to Buyer as set forth below.

                    4.1     Organization
and Power. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Connecticut. The Company
Subsidiary is duly organized, validly existing and in good standing under the
laws of the State of Connecticut. Each of the Company and the Company
Subsidiary is licensed or qualified to conduct its business and is in good
standing in those jurisdictions specified on Schedule 4.1, which
jurisdictions are the only jurisdictions in which the nature of its business or
the properties owned, leased or operated by it make such license or
qualification necessary. Each of the Company and the Company Subsidiary has the
power and authority to own, lease and operate the assets it purports to own,
lease and operate and to carry on its business in the manner and to the extent
currently conducted.

                    4.2     Authority
and Enforceability. The Company has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and to perform its obligations hereunder. The execution and
delivery by the Company of this Agreement, and the performance by the Company
of its obligations hereunder, have been duly and validly authorized by the
board of directors of the Company and no other corporate action on the part of
the Company or the Sellers is necessary. This Agreement has been duly
authorized, executed and delivered by the Company and (assuming the due
authorization, execution and delivery by Buyer, the Sellers and the
Shareholders’ Representative) constitutes the legal, valid and binding
obligations of the Company, enforceable against it in accordance with its terms
subject to bankruptcy, insolvency, 

6

reorganization,
moratorium and similar Laws of general application relating to or affecting
creditors’ rights and to general equity principles.

                    4.3     Conflicts.
The execution and delivery by the Company of this Agreement and the performance
by it of its obligations hereunder and the consummation of the transactions
contemplated hereby, does not and will not:  

                              (a)          conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of the certificate of incorporation or by-laws of the Company or the
organizational documents of the Company Subsidiary; 

                              (b)          (i)
conflict with or result in a violation or breach of any term or provision of
applicable Law (other than as would result from the identity or legal or
regulatory status of Buyer), or (ii) except for notice to be provided to
the Bureau of Alcohol, Tobacco, Firearms and Explosives, require a
registration, filing, application, notice, consent, approval, order,
qualification, or waiver with, to or from any Governmental Authority; or

                              (c)          except
for the consent required from Webster Bank, National Association (“Webster”) pursuant to the Amended and
Restated
Commercial Revolving Line of Credit Agreement between Webster, the Company and
the Company Subsidiary, dated January 31, 2007 and modified on September
26, 2007, and the other loan documents issued pursuant thereto (the “Webster Credit Agreement”),
(i) require
the Company or the Company Subsidiary to obtain any consent or approval of, or
take any action as to, or make any filing with or give any notice to, any
Person as a result or under the terms of, (ii) conflict with or result in
a violation or breach of, (iii) constitute (with or without notice or
lapse of time or both) a default under, (iv) result in or give to any
Person any right of termination, cancellation, acceleration or modification in
or with respect to, (v) result in or give to any Person any additional
rights or entitlement to increased, additional, accelerated or guaranteed
payments under or (vi) result in the creation or imposition of any
Encumbrance upon the Company or the Company Subsidiary or any of their
respective assets or properties under any material Contract or Permit to which
the Company or the Company Subsidiary is a party or by which any of their
respective assets or properties are bound.

                    4.4     Capitalization.

                              (a)          The
total authorized capital stock of the Company consists of 120,000 shares of Class
A common stock, (the “Class A Common Stock”)
of which 86,773 shares are issued and outstanding and 18,067 shares are held in
treasury, and 1,080,000 shares of Class B common stock (the “Class B Common Stock”), of which 760,936
are issued and
outstanding and 179,915 are held in treasury. The Shares constitute all of the
issued and outstanding shares of capital stock of the Company and have been
validly issued, are fully paid and nonassessable. There are no outstanding (i)
securities convertible into or exchangeable for any capital stock of the
Company; (ii) options, warrants or other rights to purchase or subscribe to
capital stock of the Company or securities convertible into or exchangeable for
capital stock of the Company; or (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any capital stock of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights. The Shares are
held of record as set forth on Schedule 1.1.

7

                              (b)          All
of the issued and outstanding equity interests of the Company Subsidiary have
been duly authorized and validly issued and the Company owns beneficially and
holds of record all of such equity interests in the Company Subsidiary free and
clear of all Encumbrances. Except for the Company’s interests in the Company
Subsidiary, neither the Company nor the Company Subsidiary owns, directly or
indirectly, any interest or investment (whether equity or debt) in any Person.

                    4.5     Financial
Statements.

                              (a)          Prior
to the execution of this Agreement, the Company has made available to Buyer:
(i) true and complete copies of the unaudited consolidated balance sheet
of the Company and the Company Subsidiary as of June 30, 2007 and the
related unaudited consolidated statements of income and comprehensive income
and cash flows (together, the “Most Recent Financial Statements”)
and (ii) true and complete copies of the audited consolidated balance
sheet of the Company and the Company Subsidiary as of, and for the respective
year then ended, December 31, 2006 (the “Most Recent Audited
Balance Sheet Date”) and December 31, 2005, including the
notes thereto, and the related statements of income and comprehensive income,
cash flows and shareholders’ equity for each of the fiscal years then ended
(together, the “Audited Financial Statements”,
and together with the Most Recent Financial Statements, the “Financial Statements”). The Financial Statements
(including the notes thereto) (i) have been prepared in conformity with
GAAP, (ii) present fairly, in all material respects, the financial
position of the Company and the Company Subsidiary as of such dates and the
results of the operations and cash flows of the Company and the Company
Subsidiary for such periods and (iii) were compiled from the books and
records of the Company and the Company Subsidiary regularly maintained by
management and used to prepare the financial statements of the Company and the
Company Subsidiary in accordance with the principles stated therein; provided,
however, that the Most Recent Financial Statements are subject to normal
year-end adjustments consistent with past practice and lack footnotes and other
presentation items. The Company and the Company Subsidiary have maintained
their respective books and records in accordance with reasonable business
practices, including the maintenance of an adequate system of internal controls,
and in a manner sufficient to permit the preparation of financial statements in
accordance with GAAP.

                              (b)          Since
the Most Recent Audited Balance Sheet Date, there has been no material change
in the Company’s accounting methods or principles that would be required to be
disclosed in the Company’s financial statements, in accordance with GAAP, that
has not been so disclosed. Except as set forth on Schedule 4.5(b), as of
the date hereof, the Company has not identified any significant deficiencies or
material weaknesses in the design or operation of “internal control over
financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act),
and there has been no incidence of fraud in the past five (5) years, whether or
not material, that involves management or other employees who have a
significant role in the Company’s internal controls over financial reporting.

                    4.6     No
Undisclosed Liabilities. There are no liabilities against, relating to or
affecting the Company or the Company Subsidiary except for (i) liabilities
disclosed, recorded in or reserved against on the Audited Financial Statements,
(ii) liabilities incurred in the ordinary course of business consistent with
past practice and (iii) the liabilities set forth on Schedule 4.6.

8

                    4.7     Operations
Since the Most Recent Audited Balance Sheet Date. Since the Most Recent
Audited Balance Sheet Date, there has not been a Material Adverse Effect, or
any event or development which, individually or together with other such
events, could reasonably be expected to result in a Material Adverse Effect.
Without limiting the foregoing, except as disclosed on Schedule 4.7,
there has not occurred between the Most Recent Audited Balance Sheet Date and
the date hereof:

                              (a)          any
authorization, issuance, sale or other disposition by the Company or the
Company Subsidiary of any shares of capital stock (or other comparable equity
interest) of or option with respect to the Company or the Company Subsidiary,
or any modification or amendment of any right of any holder of any outstanding
shares of capital stock (or other comparable equity interest) or option with
respect to the Company or the Company Subsidiary;

                              (b)          (i)
any increase in the salary, wages or other compensation of (A) any
director, officer or employee of the Company or the Company Subsidiary having a
base salary in excess of $75,000 per year or any business consultant of the
Company or the Company Subsidiary or (B) any other employee of the Company
or the Company Subsidiary in an amount greater than five percent (5%) per
annum, (ii) any establishment or modification of (A) targets, goals,
pools or similar provisions in respect of any fiscal year under any Benefit
Plan, employment-related contract or other employee compensation arrangement or
(B) salary ranges, increase guidelines or similar provisions in respect of
any Benefit Plan, employment-related contract or other employee compensation
arrangement or (iii) any adoption, entering into or becoming bound by any
Benefit Plan, employment-related contract or collective bargaining agreement,
or amendment, modification or termination (partial or complete) of any Benefit
Plan or employment-related contract, except to the extent required by
applicable Law and, in the event compliance with legal requirements presented
options, only to the extent the option which the Company or the Company
Subsidiary reasonably believed to be the least costly was chosen;

                              (c)          (i)
other than indebtedness incurred in the ordinary course pursuant to the Webster
Credit Agreement, incurrences by the Company or the Company Subsidiary of any
liability or indebtedness with respect to which the obligations of the Company
or the Company Subsidiary exceed $225,000 or (ii) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of a
scheduled payment date with respect to, or waiver of any right of the Company
or the Company Subsidiary under, any indebtedness of or owing to the Company or
the Company Subsidiary;

                              (d)          any
physical damage, destruction or other casualty loss (whether or not covered by
insurance) affecting any of the plant, real or personal property or equipment
of the Company or the Company Subsidiary in an aggregate amount exceeding
$225,000;

                              (e)          other
than in the ordinary course of business, any granting of any discounts, rebates
or similar incentives, either on a one-time or contingent basis or selling or
delivering of any product having payment terms of one hundred and twenty
(120) days or more; or any material change in (i) any pricing,
accounting, financial reporting, inventory, credit, allowance or Tax practice
or policy of the Company or the Company Subsidiary, or (ii) any method of
calculating any bad debt, contingency or other reserve of the Company or the
Company Subsidiary for accounting, financial 

9

reporting or
Tax purposes, or any change in the fiscal year of the Company or the Company
Subsidiary;

                              (f)          any
write-off or write-down of or any determination to write off or write down any
of the assets or properties of the Company or the Company Subsidiary in an
aggregate amount exceeding $100,000;

                              (g)          any
acquisition or disposition of, or incurrence of an Encumbrance on, any assets
or properties of the Company or the Company Subsidiary, other than in the
ordinary course of business consistent with past practice;

                              (h)          any
(i) amendment of the certificate or articles of incorporation or by-laws
(or other comparable corporate charter documents) of the Company or the Company
Subsidiary, (ii) recapitalization, reorganization, liquidation or
dissolution of the Company or the Company Subsidiary or (iii) merger or
other business combination involving the Company or the Company Subsidiary and
any other Person;

                              (i)          any
entering into, amendment, modification, termination (partial or complete) or
granting of a waiver under or giving any consent with respect to (i) any
Business Agreement (or agreement that had it been in effect on the date hereof
would have been a Business Agreement) or (ii) any material Permit held by
the Company or the Company Subsidiary;

                              (j)          capital
expenditures or commitments for additions to property, plant or equipment of
the Company or the Company Subsidiary constituting capital assets in an
aggregate amount exceeding $100,000;

                              (k)          any
commencement or termination by the Company or the Company Subsidiary of any
line of business;

                              (l)          any
transaction (including, without limitation, the distribution of, or granting of
any beneficial interest in, any firearm, except those listed on Schedule
6.13) by the Company or the Company Subsidiary with any of the Affiliates,
officers, directors, or shareholders thereof or any of such officer’s,
director’s, or shareholder’s Affiliates (i) outside the ordinary course of
business consistent with past practice or (ii) other than on an
arm’s-length basis, other than, in each case, pursuant to any Business
Agreement in effect on the Most Recent Audited Balance Sheet Date and disclosed
pursuant to Schedule 4.13;

                              (m)          any
disposition or lapse of any rights the Company or the Company Subsidiary has
under any Intellectual Property or disposition of or disclosure to any Person
(other than representatives of Buyer) of any trade secret, formula, process,
know-how, software, or other Company Intellectual Property not theretofore a
matter of public knowledge;

                              (n)          to
the Company’s Knowledge, any other adverse change in any rights the Company or
the Company Subsidiary has under or to Intellectual Property, other than the
expiration thereof in accordance with its terms as described in Schedule
4.11;

                              (o)          except
for the December Dividend, any declaration, reserve, payment or receipt of any
dividend or other distribution in respect of the capital stock of the Company
or direct 

10

or indirect
redemption, purchase or other acquisition or receipt of payment in respect of a
redemption, purchase or other acquisition of, any capital stock of the Company;

                              (p)          any
entering into of a Contract to do or engage in any of the foregoing after the
date hereof; or

                              (q)          any
other transaction involving or development affecting the Company or the Company
Subsidiary outside the ordinary course of business consistent with past
practice.

                    4.8     Taxes.

                              (a)          Filing
of Returns and Payment of Taxes. The Company and the Company Subsidiary
have filed all Tax Returns in connection with any federal, state or local Tax
required to be filed by it (taking account of extensions to file that have been
properly obtained), and the Company and the Company Subsidiary have timely paid
all such Taxes shown thereon to be due except as contested in good faith. All
Tax Returns were (and, as to Tax Returns not filed as of the date hereof, will
be) true, complete and correct in all material respects and filed on a timely
basis. To the Knowledge of the Company, no unresolved issue has been raised in
writing by any Governmental Authority in the course of any audit with respect
to Taxes for which the Company or the Company Subsidiary would be held liable. 

                              (b)          Tax
Liens. To the Knowledge of the Company, none of the assets of the Company
or the Company Subsidiary are subject to any lien in favor of the United States
pursuant to Section 6321 of the Code for nonpayment of federal Taxes, or
any lien in favor of any country, state or locality pursuant to any comparable
provision of state or local Law, other than Taxes not yet due and payable.

                              (c)          Audits
and Extensions; etc. Except as set forth in Schedule 4.8(c), no
Tax Return of the Company and the Company Subsidiary relating to property
Taxes, transfer Taxes, sales or use Taxes or any Tax is currently under audit
or examination by any Governmental Authority of which the Company or the
Company Subsidiary has notice, and no written notice of such an audit or
examination has been received by the Company or the Company Subsidiary. Each
deficiency resulting from any audit or examination relating to any such Taxes
by any Governmental Authority has been paid, except for deficiencies being
contested in good faith by appropriate proceedings. Except as set forth in Schedule 4.8(c),
the Company and the Company Subsidiary have not given nor is there a pending
request to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
any such Taxes.

                              (d)          Tax
Sharing Agreements. No agreement as to indemnification for, contribution
to, or payment of Taxes exists between the Company or the Company Subsidiary
and any other Person, including pursuant to any Tax sharing agreement, lease
agreement, purchase or sale agreement, partnership agreement or any other
agreement. 

                              (e)          Other
Jurisdictions. Except as set forth in Schedule 4.8(e)(i), no
jurisdiction (whether within or without the United States) in which the Company
or the Company Subsidiary has not filed a specific Tax Return has asserted that
the Company or the Company Subsidiary is required to file such Tax Return in
such jurisdiction. Schedule 4.8(e)(ii) lists all states and all
non-U.S. taxing jurisdictions in which the Company or the Company Subsidiary
files any Tax 

11

Returns and
indicates in the case of income or franchise Tax filings whether such filings
are made on a consolidated, combined or unitary basis and the state allocation
factors for the most recent taxable year for which filings have been made.

                              (f)          Withholding.
The Company (and the Company Subsidiary) has complied (and until the Closing Date
will comply) with all applicable Laws relating to the payment and withholding
of Taxes (including withholding and reporting requirements under Code §§1441
through 1464, 3401 through 3406, 6041 and 6049 and similar provisions under any
other Laws) and has, within the time and in the manner prescribed by Law,
withheld from employee wages and paid over to the proper Governmental
Authorities all required amounts.

                              (g)          Tax
Rulings, etc. Neither the Company nor the Company Subsidiary has received
any written ruling of a taxing authority relating to Taxes, or any other
written and legally binding agreement with a taxing authority relating to
Taxes.

                              (h)          Copies
of Tax Returns. The Company has made available (or, in the case of Tax
Returns to be filed on or before the Closing Date, will make available) to
Buyer complete and accurate copies of Tax Returns and associated work papers
filed by or on behalf of the Company and the Company Subsidiary for the taxable
years ending December 31, 2004 through December 31, 2006.

                              (i)          Excess
Parachute Payments. Neither the execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement, either alone
or in conjunction with or together with all other payments under any Contract
or arrangement or otherwise which alone or together with all other payments
could constitute a “parachute payment” to any “disqualified individual” as
those terms are defined in Code §280G (whether or not such payment is
considered to be reasonable compensation for services rendered).

                              (j)          Tax-Exempt
Use Property. No property of the Company (or the Company Subsidiary) is property
that the Company or any party to this transaction is or will be required to
treat as being owned by another Person pursuant to the provisions of Code
§168(f)(8) (as in effect prior to its amendment by the Tax Reform Act of
1986) or is “tax-exempt use property” or “tax-exempt bond financed property”
within the meaning of Code §168.

                              (k)          Accounting
Method, etc. Neither the Company nor the Company Subsidiary is required to
include in income any adjustment pursuant to Code §481(a) by reason of a
voluntary change in accounting method initiated by the Company (or the Company
Subsidiary), and the Internal Revenue Service (the “IRS”) has
not proposed an adjustment or change in accounting method; except as set forth
in Schedule 4.8(k), to the Knowledge of the Company no Company or
Company Subsidiary income economically accrued prior to the Closing Date will
be recognized as taxable income after the Closing Date as a result of the
Company or the Company Subsidiary having been a party to an installment sale or
an open transaction, other than any amounts that are reflected in a reserve for
Taxes on the balance sheet in the Most Recent Financial Statements.

                              (l)          Acquisition
Indebtedness. Neither the Company nor the Company Subsidiary has issued or
assumed any acquisition indebtedness within the meaning of Code §279 or is a
borrower under any loan to which the limitations of Code §163(j) apply.

12

                                     (m)          USRPHC.
The Company is not a United States real property holding corporation within the
meaning of Code §897(c)(2). 

                                     (n)          Reportable
Transactions. The Company (and the Company Subsidiary) has disclosed on its
federal income Tax Return all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
§6662. Neither the Company nor the Company Subsidiary has engaged in any
reportable transactions that were required to be disclosed pursuant to Treasury
Regulation §1.6011-4. 

                                     (o)          Tax
Returns. For all applicable Tax Returns of the Company (or the Company
Subsidiary) through December 31, 2003 (taking into account of extensions to
file that have been properly obtained), to the Knowledge of the Company either
(i) the statute of limitations for the assessment of all Taxes has expired or
(ii) all applicable Tax Returns have been examined by the appropriate taxing
authorities and no deficiency for any Taxes has been suggested, proposed,
asserted or assessed against the Company (or the Company Subsidiary) that has
not been resolved and paid in full. 

                                     (p)          Escheat
and Unclaimed Property. Except as set forth in Schedule 4.8(p), neither the
Company nor the Company Subsidiary is (or will be as of the Closing Date)
subject to levies or assessments for unclaimed property under applicable
escheat or unclaimed property Laws.  

                    4.9          Permits.
Schedule 4.9 contains a true and complete list of all Permits used in
and material, individually or in the aggregate, to the business or operations
of the Company or the Company Subsidiary (and all pending applications for any
such Permits), setting forth the grantor, the grantee, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
the Company has delivered to Buyer true and complete copies of all such Permits.
Except as set forth on Schedule 4.9, (a) the Company or the Company Subsidiary
owns or validly holds all Permits that are necessary to entitle it to own or
lease, operate and use its assets and to carry on and conduct its business
substantially as currently conducted, (b) each Permit listed on Schedule 4.9 is
valid, binding and in full force and effect and (c) neither the Company nor the
Company Subsidiary is, or has received any notice that it is in default (or
with the giving of notice or lapse of time or both, would be in default) under
any material Permit.  

                    4.10          Real
Property. 

                                     (a)          Schedule
4.10(a) sets forth the address and description of each parcel of Owned Real
Property. With respect to each parcel of Owned Real Property, and except as set
forth on Schedule 4.10(a):  

                                     (i)          the
Company or the Company Subsidiary has good and marketable fee simple title,
free and clear of all Encumbrances; 

                                     
(ii)          except for the
real property lease agreement between the Company and The Marlin Company (the “TMC Lease”), a true
and complete copy of which has been provided to Buyer, neither of the Company nor
the Company Subsidiary has leased or otherwise granted to any Person the right
to use or occupy such Owned Real Property or any portion thereof and the
Company or the Company Subsidiary is in possession of each parcel of such Owned
Real Property; 

13

                                     (iii)          the
Company or the Company Subsidiary has adequate rights of ingress and egress; 

                                     (iv)          there
are no outstanding options, rights of first offer or rights of first refusal to
purchase such Owned Real Property or any portion thereof or interest therein;
and 

                                     (v)          none
of such Owned Real Property, or the use thereof, contravenes or violates any
building, zoning, administrative or occupational safety and health or other
applicable Law in any material respect (whether or not permitted on the basis
of prior nonconforming use, waiver or variance). 

                                     (b)          Schedule
4.10(b) contains a list of all leases and subleases, if any, (the “Leases”) of real
property pursuant to which the Company or the Company Subsidiary is the lessee
(the “Leased Real
Property”). The Company or the Company Subsidiary has a valid
and subsisting leasehold estate in and the right to quiet enjoyment of the real
properties leased by it for the full term of the lease thereof. Each Lease is a
legal, valid and binding agreement, enforceable in accordance with its terms,
of the Company or the Company Subsidiary and, to the Knowledge of the Company,
of each other Person that is a party thereto and there is no, and none of the
Company nor the Company Subsidiary has received notice of any, material default
by the Company or the Company Subsidiary (or any condition or event which,
after notice or lapse of time or both, would constitute a default) thereunder.
Neither the Company nor the Company Subsidiary has reason to believe that any
lessor under any Lease will not consent (where such consent is necessary) to
the consummation of the transactions contemplated by this Agreement without
requiring any modification of the rights or obligations of the lessee
thereunder. Neither the Company nor the Company Subsidiary owes any brokerage
commissions with respect to any such leased space. 

                                     (c)          Prior
to the execution of this Agreement, the Company has delivered to Buyer true and
complete copies of (i) all deeds, leases, mortgages, deeds of trust,
certificates of occupancy, title insurance policies, title reports, surveys and
similar documents, and all amendments thereof, with respect to the Owned Real
Property and (ii) all leases, licenses, tenancies, subleases and other material
occupancy agreements (including any amendments and renewal letters) and, to the
extent reasonably available, all other documents referred to in clause (i) of
this paragraph (c) with respect to the real property leased by the Company and
the Company Subsidiary. 

                                     (d)          Except
as set forth on Schedule 4.10(d), the improvements on the Owned Real Property
are in good operating condition and in a state of good maintenance and repair
ordinary wear and tear excepted, are adequate and suitable for the purposes for
which they are presently being used and, to the Knowledge of the Company, there
are no condemnation or appropriation proceedings pending or threatened against
any of such Owned Real Property.  

                    4.11          Intellectual
Property. 

                                     (a)          Each
of the Company and the Company Subsidiary owns legal title to, or pursuant to
written agreement has valid and enforceable rights to use, all Intellectual
Property which is used in or necessary for the operation of its respective
business. 

14

                                     (b)          Schedule
4.11(b) contains a complete and correct list of all Patents, Marks, and
Copyrights owned by the Company or the Company Subsidiary (“Company Intellectual Property”).
Each of the Company and the Company Subsidiary, as applicable, owns the entire
right, title, and interest in and to the Company Intellectual Property, free
and clear of Encumbrances. All of the Company Intellectual Property is valid
and in full force and effect. Except as set forth on Schedule 4.11(b), none of
the Company Intellectual Property has lapsed, expired, or been abandoned since
December 31, 2004. 

                                     (c)          Neither
the Company nor the Company Subsidiary has received any notice that there is
any material violation by any other Person of any right of the Company or the
Company Subsidiary with respect to any or all Company Intellectual Property.
Neither the Company nor the Company Subsidiary has entered into or consummated
any material license or user agreement with another Person in respect to any or
all Company Intellectual Property. 

                                     (d)          To
the Knowledge of the Company, the Company Intellectual Property, for which the
value is dependent upon its confidentiality, has not been misappropriated nor
has it been the subject of an unauthorized disclosure. 

                                     (e)
          To the Knowledge of
the Company, during the previous three (3) years, no material Action has been
taken or threatened, (i) alleging that the conduct of the Company or the
Company Subsidiary or any Company Intellectual Property infringes on or
misappropriates the Intellectual Property of another Person or (ii) challenging
the ownership, right to use, or validity of Company Intellectual Property. To
the Knowledge of the Company, there is no valid basis for any Action described
in this Section 4.11(e). 

                                     (f)
          The consummation of
this Agreement will not result in the loss or impairment of any rights to own,
use, or sell any or all Company Intellectual Property. 

                    4.12          Compliance
with Laws. Except as set forth in Schedule 4.12, the Company and the
Company Subsidiary are in material compliance with all applicable Laws and have
complied in a timely manner with all Laws that materially affect the business
or condition of the Company or the Company Subsidiary, including without
limitation, all Laws applicable to the import, export, manufacture, use,
transportation, possession, and transfer of firearms and other defense
articles, including without limitation, the Gun Control Act of 1968 (chapter 44
of title 18, United States Code), the National Firearms Act of 1934 (chapter 53
of title 26, United States Code), and the Arms Export Control Act (22 U.S.C. §
2778), as well as all implementing regulations thereto (collectively, “Firearms Regulations”).
No notice, charge, claim or assertion to the effect that the Company or the
Company Subsidiary is not in material compliance with any Law has been received
by the Company or the Company Subsidiary nor has any been filed, commenced or,
to the Knowledge of the Company, threatened against the Company or the Company
Subsidiary. To the Knowledge of the Company, there are no contemplated or
pending enforcement or regulatory actions by any Governmental Authority
directed at the Company (as opposed to the firearms industry as a whole) which
could be reasonably expected to adversely affect or impede the Company or the
Company Subsidiary’s ability to operate its business in accord with Firearms
Regulations. 

                    4.13          Contracts.

Schedule 4.13 (with paragraph references corresponding to those set forth
below) sets forth a true and correct list of each of the following: 

15

                                     (a)          Any
Contract (other than Benefit Plans listed on Schedule 4.15(a), the leases
listed on Schedules 4.10(a) and (b) and insurance policies listed on Schedule 4.19)
that (i) involve the payment or potential payment, pursuant to the terms of any
such Contract, by or to the Company or the Company Subsidiary of $100,000 or
more and which is not terminable on thirty (30) days’ or less notice and
without liability, penalty or premium; 

                                     (b)          Any
Contract (including purchase orders) involving the obligation of the Company or
the Company Subsidiary to sell products or services pursuant to which the
aggregate of payments to become due to the Company or the Company Subsidiary is
equal to or exceeds $100,000, and which is not terminable on thirty (30) days’
or less notice and without liability, penalty or premium; 

                                     (c)          Any
distributor, dealer, sales, advertising, agency, consultant, lobbying,
manufacturer’s representative, franchise or similar Contract not cancelable by
the Company or the Company Subsidiary on notice of not more than thirty (30)
days and without liability, penalty or premium, and all Contracts (other than
the Benefit Plans listed on Schedule 4.15(a)) providing for the payment
of any bonus or commission based on sales or earnings; 

                                     (d)          Any
commitment of the Company or the Company Subsidiary to make a capital
expenditure or to purchase a capital asset (in either case involving a cost in
excess of $25,000 individually or $100,000 in the aggregate) not contemplated
by the capital expenditure budget of the Company or the Company Subsidiary; 

                                     (e)          Any
Contract with any Person containing any exclusivity or covenant prohibiting or
limiting the ability of the Company, the Company Subsidiary or, following the
consummation of the transactions contemplated by this Agreement, Buyer to
engage in any business activity or compete with any Person or, except as
provided in the Non-Competition Agreement and the Trademark Coexistence
Agreement, prohibiting or limiting the ability of any Person to compete with
the Company or any Subsidiary; 

                                     (f)          Any
lease or similar agreement under which (i) the Company or the Company
Subsidiary is the lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any third Person for an
annual rent in excess of $25,000 or (ii) the Company or the Company Subsidiary
is the lessor of, or makes available for use by any third Person, any tangible
personal property owned by it for an annual rent in excess of $25,000; 

                                     (g)          All
partnership, joint venture, shareholders’ or similar Contracts, and any
Contracts purporting to effect a waiver or termination thereof, which the
Company or the Company Subsidiary is a party or by which any of their assets or
properties are bound; 

                                     (h)          All
Contracts relating to indebtedness of the Company or the Company Subsidiary in
excess of $100,000; 

                                     (i)          All
Contracts relating to (i) the future disposition or acquisition of any assets
or properties, other than dispositions or acquisitions in the ordinary course
of business consistent with past practice, and (ii) any merger or other
business combination; 

16

                                     (j)          All
Contracts between or among the Company or the Company Subsidiary, on the one
hand, and any of the Affiliates, officers, directors, or shareholders thereof
or any of such officer’s, director’s, or shareholder’s Affiliates, on the other
hand; 

                                     (k)          All
Contracts that (i) limit or contain restrictions on the ability of the Company
or the Company Subsidiary to declare or pay dividends on, to make any other
distribution in respect of or to issue or purchase, redeem or otherwise acquire
its capital stock, to incur indebtedness, to incur or suffer to exist any
Encumbrance, to purchase or sell any assets or properties, to change the lines
of business in which it participates or engages or to engage in any merger,
consolidation or other business combination or (ii) require the Company or the
Company Subsidiary to maintain specified financial ratios or levels of net
worth or other indicia of financial condition; and 

                                     (l)          All
Contracts, including licenses, sublicenses, agreements and permissions, by
which the Company or the Company Subsidiary uses the Intellectual Property
owned by a third party (other than ordinary course off-the-shelf software
licenses) or a third party uses the Company Intellectual Property. 

                    4.14          Status
of Contracts. Each of the Contracts set forth on Schedules 4.10(b), 4.13, and
4.17(a) (collectively, the “Business Agreements”) is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance
with its terms, of the Company or the Company Subsidiary and, to the Knowledge
of the Company, each party thereto. Prior to the execution of this Agreement,
the Company has either delivered to Buyer or has given Buyer access to true and
complete copies or, if none, reasonably complete and accurate written
descriptions, together with all amendments and supplements thereto and all
waivers of any terms thereof, of the Business Agreements. Neither the Company,
the Company Subsidiary nor, to the Knowledge of the Company, any other party to
such Business Agreement, is in, or, to the Knowledge of the Company, alleged to
be in, material violation or breach of or default under any such Business
Agreement (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Business Agreement) in any material
respect. Except for warranty claims arising in the ordinary course of business,
there are no outstanding claims for indemnification under any such Business
Agreement. 

                    4.15          Employee
Benefits.

                                     (a)          Schedule
4.15(a) (i) contains a true and complete list of each Benefit Plan, (ii)
identifies each Benefit Plan that is a Qualified Plan, (iii) identifies each
Benefit Plan that is a Deferred Compensation Plan, Pension Plan and SERP and
(iv) identifies each Benefit Plan that at any time during the five (5) year
period preceding the date of this Agreement was a Defined Benefit Plan. Neither
the Company nor the Company Subsidiary has scheduled or agreed (i) to establish
any plan, program, policy or arrangement that would be considered to be a
Benefit Plan or (ii) to increase benefit levels (or to create new benefits)
with respect to any Benefit Plan. Except as disclosed in Schedule 4.15(a), no
loan is outstanding between the Company or the Company Subsidiary and any
current or former employee thereof. 

                                     (b)          Complete
and correct copies of the following documents have been furnished to Buyer
prior to the execution of this Agreement: (i) the Benefit Plans, any related
trust agreements, and service provider agreements, insurance contracts or
agreements with investment managers, including without limitation, all
amendments thereto, (ii) current summary plan descriptions 

17

of each
Benefit Plan subject to ERISA, and any similar descriptions of all other
Benefit Plans, (iii) the two most recent Form 5500’s and schedules thereto for
each Benefit Plan subject to ERISA reporting requirements; (iv) the most recent
determination of the IRS with respect to each Qualified Plan, (v) the most
recent financial statements prepared with respect to any Benefit Plan and (vi)
the most recent actuarial report of the qualified actuary of any Benefit Plan
with respect to which actuarial valuations are, or are required to be,
conducted. 

                                     (c)          Each
of the Benefit Plans is, and its administration is and has been since
inception, in all material respects in compliance with, and neither the Company
nor the Company Subsidiary has received any claim or notice that any such
Benefit Plan is not in compliance with, all applicable Laws, including
reporting obligations to the Department of Labor, and prohibited transactions
exemptions. Each Qualified Plan is qualified under Section 401(a) of the Code
and has received an IRS determination letter or has adopted a prototype plan
and the prototype sponsor has received an opinion letter from the IRS as to the
plan’s qualified status. Except as disclosed in Schedule 4.15(c), each Benefit
Plan intended to provide for the deferral of income, the reduction of salary or
other compensation or to afford other Tax benefits complies with the
requirements of the applicable provisions of the Code or other Laws required in
order to provide such Tax benefits. 

                                     (d)          Neither
Company nor the Company Subsidiary is in default in performing any of its
contractual obligations under any of the Benefit Plans or any related trust
agreement or insurance contract. All contributions and other payments required
to be made by the Company or the Company Subsidiary to any Benefit Plan with
respect to any period ending before or at or including the Closing Date have
been made or reserves adequate for such contributions or other payments have
been or will be set aside therefore and have been or will be reflected in the
Financial Statements in accordance with GAAP. There are no material outstanding
liabilities of, or related to, any Benefit Plan, other than liabilities for
benefits to be paid in the ordinary course to participants in such Benefit Plan
and their beneficiaries in accordance with the terms of such Benefit Plan. 

                                     (e)          No
event has occurred, and there exists no condition or set of circumstances in
connection with any Benefit Plan, under which the Company or the Company
Subsidiary, directly or indirectly (through any indemnification agreement or
otherwise), could reasonably be expected to be subject to any risk of material
liability under ERISA, the Code, or any other applicable Law other than
liabilities for benefits or ancillary administrative services incurred in the
ordinary course. 

                                     (f)          There
are no pending or, to the Knowledge of the Company, threatened claims or
investigations related to any Benefit Plan, nor is there any basis for such a
claim or investigation. 

                                     (g)          No
transaction contemplated by this Agreement will result in liability under
Sections 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to the
Company, the Company Subsidiary, Buyer or any corporation or organization
controlled by or under common control with any of the foregoing within the
meaning of Section 4001 of ERISA, and no event or condition exists or has existed
which could reasonably be expected to result in any such liability with respect
to Buyer, the Company, the Company Subsidiary or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA. No “reportable event”, other than
the transactions contemplated by this Agreement, within the meaning of 

18

Section 4043
of ERISA has occurred or is expected to occur with respect to any Defined
Benefit Plan for which the reporting requirements have not been waived. No
termination, re-establishment or spin off transaction has occurred with respect
to any Defined Benefit Plan. No Defined Benefit Plan has incurred any
accumulated funding deficiency, whether or not waived. No filing has been made
and no proceeding has been commenced for the complete or partial termination
of, or withdrawal from, any Pension Plan, except as set forth in Schedule
4.15(g). 

                                     (h)          Except
as set forth in Schedule 4.15(h), the fair market value of the assets of
each Defined Benefit Plan, as determined as of the last day of the plan year of
such plan which coincides with or first precedes the date of this Agreement,
was not less than the present value of the projected benefit obligations under
such plan at such date as established on the basis of the actuarial assumptions
applicable under such Defined Benefit Plan at said date and, to the Knowledge
of the Company, there have been no material changes in such values since said
date. 

                                     (i)          Except
as disclosed in Schedule 4.15(i), no benefit under any Benefit Plan, including,
without limitation, any severance or parachute payment plan or agreement, will
be established or become accelerated, vested, funded or payable by reason of
any transaction contemplated under this Agreement. No Benefit Plan provides for
any additional amounts to be paid with respect to any Tax imposed under Section
4999 of the Code. 

                                     (j)          Except
as set forth on Schedule 4.15(j), no Benefit Plan provides welfare
coverage that extends after the termination of employment other than for
continued coverage provided pursuant to the requirements of Section 4980B of
the Code or other similar provision of state law and each Benefit Plan
providing such coverage may be amended, modified or terminated after the
Closing Date without cost or liability other than for claims for expenses
actually incurred prior to the date of such amendment, modification or
termination. No Company Subsidiary employee is eligible for benefits under any
Benefit Plan set forth in Schedule 4.15(j). 

                                     (k)          The
Company has taken all actions necessary to effectuate a complete cessation of
all future benefit accruals under any Pension Plan, including without
limitation adopting all necessary plan amendments and providing the notice to
plan participants satisfying all of the requirements of Section 204(h) of
ERISA, with such cessation to be effective as of a date no later than December
31, 2007. 

                    4.16          Environmental
Compliance. 

                                     (a)          Each
of the Company and the Company Subsidiary is in compliance in all material
respects with currently applicable Environmental Laws and (except as noted in Schedule
4.16(a)) has at all times complied in all material respects with all
Environmental Laws. 

                                     (b)
          (i) Each of the Company and the
Company Subsidiary possesses all Permits required under Environmental Laws for
its operations as currently conducted, (ii) all such Permits are in full force
and effect, and (iii) no actions are pending, or to the Knowledge of the
Company, threatened, to amend, challenge, terminate, cancel, limit, restrict or
appeal any such Permits. 

                                     (c)          Except
as noted in Schedule 4.16(c), there has been no release of any Hazardous
Substance by the Company or the Company Subsidiary or any other party at the
Owned Real Property or any of the Leased Real Property that is in material
violation of or could lead to any 

19

material
liability or material investigative, corrective or remedial obligation arising
under any Environmental Law. 

                                     (d)          Except
as noted in Schedule 4.16(d) none of the Company, the Company Subsidiary
or any of their respective predecessors or Affiliates has (i) treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled,
or released any Hazardous Substance so as to give rise to any material
liability or any material investigative, corrective or remedial obligation
under any Environmental Law, or (ii) either expressly or by operation of law,
assumed or undertaken any material liability or any material obligation for
corrective or remedial action of any other Person under any Environmental Law. 

                                     (e)          Except
as noted in Schedule 4.16(e) with respect to those certain parcels of
real property located at 85 Willow Street, New Haven, Connecticut (the “New Haven Property”),
and 100 Kenna Drive in North Haven, Connecticut (the “North Haven Property”)
neither the Company nor the Company Subsidiary has received since January 1,
2002 (or prior to this date with respect to matters that are not fully resolved
and corrected, including the payment of fines and penalties with respect
thereto) any written or other notice of violation or liability, nor is any
Action pending or, to the Knowledge of the Company, threatened, asserting an
actual or potential liability or obligation under any Environmental Law in
respect to the Company or the Company Subsidiary or any of their current or
former facilities or operations. All agreements between the Company and the
State of Connecticut with respect to environmental matters related to the New
Haven Property are listed on Schedule 4.16(e). 

                                     (f)          Except
as in the ordinary course of business pursuant to Permits issued by the
Connecticut Department of Environmental Protection, the Massachusetts
Department of Environmental Protection and/or the U.S. Environmental Protection
Agency for the facilities and operations of the Company and the Company
Subsidiary, neither the Company nor the Company Subsidiary has transported or
arranged for the treatment, storage, handling, disposal or transportation of
any Hazardous Substance to any off-site location. 

                                     (g)          All
material environmental studies and audits conducted in relation to the Owned
Real Property or the Leased Real Property by or on behalf of the Company or the
Company Subsidiary in the last five (5) years are listed on Schedule 4.16(g),
copies of which have been provided to Buyer. 

                                     (h)          Except
for obligations under the Connecticut Transfer Act (Section 22a-134 et seq. of the Connecticut General
Statutes) (the “Transfer
Act”) with respect to the North Haven Property, neither this
Agreement nor the consummation of the transaction that is the subject of this
Agreement will result in any obligations for site investigation or cleanup, or
notification to or consent of government agencies or third parties, pursuant to
any “transaction triggered” or “responsible property transfer” Environmental
Laws. 

                                     (i)          Notwithstanding
any other provision of this Agreement, this Section 4.16 contains the sole and
exclusive representations and warranties of the Company and Sellers with
respect to environmental matters, including all matters arising under
Environmental Laws. 

20

                                     (j)          For
the avoidance of doubt, the AOCs are exceptions to the representations and
warranties in this Section 4.16 and the Sellers make no representation or
warranty as to the noncompliance with Environmental Laws or the release of
Hazardous Substances to the extent such noncompliance or release arises from
one or more of the AOCs. 

                    4.17         
Employee Relations and Agreements. 

                                     (a)          Schedule
4.17(a) contains a list of (i) all employment, severance, consulting or
similar agreements to which the Company or the Company Subsidiary is a party as
of the date of this Agreement, other than employment agreements terminable by
either party at-will and without any severance obligation on the part of the
Company or the Company Subsidiary, (ii) all severance programs or policies of
the Company or the Company Subsidiary with or relating to its employees and
(iii) all other agreements that entitle any employee to compensation or other
consideration as a result of the acquisition by any Person of control of the Company
or the Company Subsidiary. 

                                     (b)          Neither
the Company nor the Company Subsidiary is a party to any collective bargaining
agreement or other labor contract. Neither the Company nor the Company
Subsidiary is subject to any (i) unfair labor practice complaint pending before
the National Labor Relations Board or any other federal, state, local or
foreign agency, (ii) pending or, to the Knowledge of the Company, threatened
labor strike, slowdown, work stoppage, lockout, or other organized labor
disturbance, (iii) pending grievance proceeding, (iv) pending representation
question, or (v) to the Knowledge of the Company, attempt by any union to
represent employees as a collective bargaining agent. 

                                     (c)          The
Company and the Company Subsidiary are in compliance in all material respects
with all applicable Laws respecting labor, employment, fair employment
practices, terms and conditions of employment, workers’ compensation,
occupational safety, plant closings, and wages and hours. 

                                     (d)          To
the Knowledge of the Company, none of the employees of the Company or the
Company Subsidiary is in any material respect in violation of any term of any
employment agreement, nondisclosure agreement, common law nondisclosure
obligation, fiduciary duty, non-competition agreement, restrictive covenant or
other obligation to a former employer relating to the right of such employee to
be employed by the Company or the Company Subsidiary or the employee’s
knowledge or use of trade secrets or proprietary information. 

                    4.18
       Litigation. Except as disclosed on Schedule 4.18 (with paragraph
references corresponding to those set forth below): 

                                     (a)          there
are no outstanding injunctions, judgments, orders, decrees, rulings, or charges
against the Company or the Company Subsidiary; 

                                     (b)          there
are no Actions, hearings, or investigations of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction pending or, to the Knowledge of the Company threatened
against, relating to or affecting the Company or the Company Subsidiary which
(i) could reasonably be expected to result in the issuance of an order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the 

21

transactions
contemplated by this Agreement or the Escrow Agreement or otherwise result in a
material diminution of the benefits contemplated by this Agreement to Buyer, or
(ii) if determined adversely to the Company or the Company Subsidiary, could
reasonably be expected to result in (A) any injunction or other equitable
relief against the Company or the Company Subsidiary that would interfere in
any material respect with its business or operations or (B) Losses by the
Company or the Company Subsidiary, individually or in the aggregate with Losses
in respect of other such Actions, that would be reasonably expected to have a
Material Adverse Effect; and 

                                     (c)          there
are no facts or circumstances Known to the Company that could reasonably be
expected to give rise to any Action that would be required to be disclosed
pursuant to clause (b) above. 

Schedule 4.18(d) sets forth all payments,
listing the amounts and dates of each such payment, made or accrued since the
Most Recent Audited Balance Sheet Date in connection with the law suits set
forth thereon. 

                    4.19          Insurance.
All policies or binders of fire, liability, product liability, worker’s
compensation, vehicular and other insurance held by or on behalf of the Company
or the Company Subsidiary are listed and described on Schedule 4.19. The
insurance coverage provided by any of the policies described on Schedule
4.19 will not terminate or lapse by reason of the transactions contemplated
by this Agreement. Each policy listed on Schedule 4.19 is valid and
binding and in full force and effect, all premiums on all such policies have
been paid to date and each of the Company and the Company Subsidiary has
complied with all terms and conditions of such policies and neither the
Company, the Company Subsidiary nor the Person to whom such policy has been
issued has received any notice of cancellation or termination in respect of any
such policy or is in default thereunder. The insurance limits of such policies
listed on Schedule 4.19 have not been exhausted or materially
diminished. The insurance policies listed on Schedule 4.19, in light of
the respective business, operations and assets and properties of the Company
and the Company Subsidiary, are in amounts and have coverages that are
reasonable and customary for Persons engaged in such businesses and operations
and having such assets and properties and are placed with insurers that are
reputable and, to the Knowledge of the Company, financially sound. Neither the
Company, the Company Subsidiary nor the Person to whom such policy has been
issued has received notice that any insurer under any policy referred to in
this Section 4.19 is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. 

                    4.20          Suppliers
and Customers. Schedule 4.20(a) lists the ten (10) largest customers
of the Company and the Company Subsidiary, on the basis of revenues for goods
sold or services provided for each of the three (3) most recently-completed fiscal
years. Schedule 4.20(b) lists the ten (10) largest suppliers of the
Company and the Subsidiary, on the basis of cost of goods or services purchased
for the most recently-completed fiscal year. No such material supplier of the
Company or the Company Subsidiary has canceled or materially reduced any
contract or order for provisions of, and, to the Knowledge of the Company,
there has been no threat by any material supplier not to provide products,
supplies, or services to the Company or the Company Subsidiary at any time in
the last two years. Except for Wal-Mart Stores, Inc., no such material customer
of the Company or the Company Subsidiary has canceled or materially reduced any
contract or order for provisions of and, to the Knowledge of the Company, there
has been no threat by any material customer to cancel or materially reduce any
order for products, supplies or services from the Company or the Company
Subsidiary at 

22

any time in
the last two years, other than order cancellations made in the ordinary course
of business consistent with the Company’s past experience. 

                    4.21     Accounts
Receivable. Except as set forth on Schedule 4.21(i), all of the accounts
receivable owing to the Company or the Company Subsidiary, net of applicable
reserves, (i) constitute legal, valid and binding obligations of the
respective debtors enforceable in accordance with their terms, (ii) arose
from bona fide transactions for goods sold or services performed in the
ordinary course of business and are payable on ordinary trade terms,
(iii) are not subject to any valid set-off or counterclaim, (iv) do
not represent obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement, (v) are
believed in good faith by the Company to be genuine and collectible, in the
ordinary course of business consistent with past practice, in the aggregate
recorded amounts thereof net of any applicable reserves and (vi) are not the
subject of any Actions brought by or on behalf of the Company or the Company
Subsidiary. To the Knowledge of the Company and except as set forth on Schedule
4.21(i), no account debtor has refused or threatened to refuse to pay its
obligations for any reason and no account debtor is insolvent or bankrupt.
There are no security arrangements and collateral securing the repayment or
other satisfaction of receivables of the Company and the Company Subsidiary; provided,
that Schedule 4.21(ii) lists all letters of credit issued in favor
of the Company or the Company Subsidiary.

                    4.22     Properties.

                                (a)          Except
for (i) the security interest granted by the Company and the Company
Subsidiary to Webster and (ii) the financing statements filed by the State
of Connecticut Department of Economic and Community Development and set forth
on Schedule 4.22, each of the Company and the Company Subsidiary is
in possession of and has good and marketable title to, or has valid leasehold
interests in or valid rights under Contract to use, all personal property,
whether tangible or intangible, used in or reasonably necessary for the conduct
of their business, including all tangible personal property reflected on the
balance sheet included in the Most Recent Audited Balance Sheet Date and
tangible personal property acquired since the date of the Most Recent Audited
Balance Sheet Date other than property disposed of since such date in the
ordinary course of business consistent with past practice. Except for the
security interest granted by the Company and the Company Subsidiary to Webster,
all such tangible personal property is free and clear of all Encumbrances.

                                (b)          All
material items of machinery, equipment, and other tangible assets of each of
the Company and the Company Subsidiary are in operational condition, normal
wear and tear excepted, have been regularly and properly serviced and
maintained in a manner that would not void or limit the coverage of any
warranty thereon, other than items currently under, or scheduled for, repair or
construction, in the ordinary course of business consistent with past practice,
and are adequate and fit to be used for the purposes for which they are
currently used in the manner they are currently used.

                    4.23     Bank
Accounts. Schedule 4.23 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the Company or the Company Subsidiary maintains accounts
of any nature, the account numbers of all such accounts and the names of all
Persons authorized to draw thereon or make withdrawals therefrom.

23

                    4.24     Powers
of Attorney; Guarantees. 

                                (a)          Neither
the Company nor the Company Subsidiary has an obligation to act under any
outstanding power of attorney or any obligation or liability, either accrued,
accruing or contingent, as guarantor, surety, co-signor, endorser (other than
for purposes of collection in the ordinary course of business of the Company
and the Company Subsidiary), co-maker or indemnitor in respect of the
obligation of any Person.

                                (b)          Except
as set forth on Schedule 4.24, neither the Company nor the Company
Subsidiary has any powers of attorney or comparable delegations of authority
outstanding.

                    4.25     Transactions
with Affiliates. Except for the TMC Lease and as set forth on Schedule
4.25, there are no liabilities or existing business relationships between
the Company and the Company Subsidiary and any of the Affiliates, officers,
directors, or shareholders thereof or any of such officer’s, director’s, or
shareholder’s Affiliates. No Affiliate, officer, director, or shareholder of
the Company or the Company Subsidiary, provides or causes to be provided any
assets, services or facilities used or held for use in connection with the
business of the Company or the Company Subsidiary. To the Knowledge of the
Company, no such Person is engaged in competition with the Company or the
Company Subsidiary with respect to any line of the products or services of the
Company or the Company Subsidiary in any market presently served by the Company
or the Company Subsidiary. Except as disclosed on Schedule 4.25,
since the Most Recent Audited Balance Sheet Date, all settlements of
intercompany liabilities between the Company or the Company Subsidiary, on the
one hand, and any of the Affiliates, officers, directors, or shareholders
thereof or any of such officer’s, director’s, or shareholder’s Affiliates, on
the other hand, have been made, and all allocations of intercompany expenses
have been applied, in the ordinary course of business consistent with past
practice.

                    4.26     Inventory.
All inventory of the Company and the Company Subsidiary reflected on the
balance sheet included in the Most Recent Financial Statements consisted, and
all such inventory acquired since the date of the Most Recent Financial
Statements consists, of a quality and quantity usable and salable in the
ordinary course of business consistent with past practice, subject to any
applicable reserves and normal and customary allowances in the industry for
spoilage, damage and outdated items. Except for the security interest granted
by the Company and the Company Subsidiary to Webster and except as disclosed in
the notes to the Audited Financial Statements, all items included in the
inventory of the Company and the Company Subsidiary are the property of the
Company and the Company Subsidiary, free and clear of any Encumbrance, have not
been pledged as collateral, are not held by the Company or the Company Subsidiary
on consignment from others and conform in all material respects to all
standards applicable to such inventory or its use or sale imposed by
Governmental Authorities. The Company and the Company Subsidiary have not sold
any inventory that is subject to any repurchase or return arrangement or
obligation.

                    4.27     Corrupt
Practices. Neither the Company nor the Company Subsidiary, nor any
director, officer, agent, employee (whether full time or contract) or other
Person acting on behalf of the Company or the Company Subsidiary has, in the
course of its actions for, or on behalf of, the Company or the Company
Subsidiary (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee (whether full time or 

24

contract) from
corporate funds; or (iii) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee (whether full time or contract).

                    4.28     Books
and Records. The minute books and other similar records of the Company and
the Company Subsidiary as made available to Buyer prior to the execution of
this Agreement contain a true and complete record, in all material respects, of
all action taken at all meetings and by all written consents in lieu of
meetings of the shareholders, the boards of directors and committees of the
boards of directors of the Company and the Company Subsidiary for the periods
covered by such minute books. The stock transfer ledgers and other similar
records of the Company and the Company Subsidiary as made available to Buyer,
prior to the execution of this Agreement, accurately reflect all record
transfers prior to the execution of this Agreement in the capital stock of the
Company and the Company Subsidiary during the periods covered by such ledgers.

                    4.29     Product
Liabilities and Product Warranties. Except as disclosed on Schedule 4.29,
there are no pending or, to the Knowledge of the Company, threatened product
liability claims against the Company or the Company Subsidiary. Schedule 4.29
sets forth a summary of each product liability claim in excess of $100,000 paid
by the Company or the Company Subsidiary in the past five (5) years.
Standard form product warranties issued by the Company and the Company
Subsidiary are listed and described on Schedule 4.29. To the
Knowledge of the Company, the reserves set forth on the Most Recent Financial
Statements are adequate for all pending, threatened and reasonably anticipated
product warranty claims. There are no uninsured product liability claims that
are pending or, to the Knowledge of the Company, threatened. 

                    4.30     Waiver
and Termination of the Stockholders Agreement. The stockholders executing
the Waiver and Termination Agreement attached hereto as Exhibit B (the “Waiver and Termination
Agreement”),
represent all of the stockholders necessary to terminate the Stockholders
Agreement, by and among the Company and the stockholders listed therein, dated
as of January 17, 1996, pursuant to its terms. 

                    4.31     Vintage
Firearms Value. The fair market value of the Vintage Firearms, in the
aggregate, does not exceed the total amount listed on Schedule 6.13. 

                    4.32     No
Brokers. Except for Duff & Phelps Securities, LLC, the fees of which
shall be paid by the Company and included in the Expense Amount, neither the
Company nor any Seller has become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER

                    As
an inducement to the Company and the Sellers to enter into this Agreement and
to consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to the Company and the Sellers as follows:

                    5.1     Organization
of Buyer. Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Buyer has the corporate
power and corporate authority to own or lease its assets and to carry on its
businesses as currently conducted.

25

                    5.2     Authority
of Buyer. Buyer has the corporate power and corporate authority to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by Buyer has been duly authorized and approved by its board of
directors and does not require any further authorization or consent of its
stockholders. This Agreement has been duly authorized, executed and delivered
by Buyer and (assuming the valid authorization, execution and delivery of this
Agreement by the Company and the Sellers) is the legal, valid and binding
agreement of Buyer, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar Laws of general
application relating to or affecting creditors’ rights and to general equity
principles.

                    5.3     No
Violation of Law and Agreements. The execution and delivery by Buyer of
this Agreement, and the performance by each of its obligations hereunder, does
not and will not:

                              (a)          Violate
any provision of the certificate of incorporation or by-laws of Buyer;

                              (b)          To
the knowledge of Buyer, violate any provision of applicable Law relating to
Buyer;

                              (c)          Except
as set forth on Schedule 5.3, require a registration, filing,
application, notice, consent, approval, order, qualification, authorization,
designation, declaration or waiver with, to or from any Governmental Authority;
or

                              (d)          To
the knowledge of Buyer, (i) require a consent, approval or waiver from, or
notice to, any party to any material contract to which Buyer is a party, or
(ii) result in a breach of, constitute a default under, or result in the
acceleration of material obligations, loss of material benefit or increase in
any material liabilities or fees under, or create in any party the right to
terminate, cancel or modify, any agreement to which Buyer is a party.

                    5.4     No
Litigation or Regulatory Action. There is no Action pending or, to the
knowledge of Buyer, threatened, against Buyer or its Affiliates which would
reasonably be expected to prevent, hinder or delay the consummation of any of
the transactions contemplated hereby. There is no Action pending or, to the
knowledge of Buyer, threatened, that questions the legality or propriety of the
transactions contemplated by this Agreement.

                    5.5     Financial
Ability. Buyer has, and will have on the Closing Date, and thereafter as
needed, sufficient cash on hand from Buyer’s immediately available internal
organization funds or available under a currently established committed credit
facility or unutilized lines of credit with financial institutions, to
consummate the transactions contemplated by this Agreement and perform its
obligations hereunder.

                    5.6     Solvency.
On the Closing Date, after giving effect to all indebtedness being incurred on
such date in connection herewith, Buyer will not (a) be insolvent (either
because its financial condition is such that the sum of its debts is greater
than the fair value of its assets or because the present fair salable value of
its assets will be less than the amount required to pay its probable liability
on its debts as they become absolute and matured), (b) have unreasonably
small capital with which to engage in its business or (c) have incurred or
plan to incur debts beyond its ability to pay as they become absolute and
matured.

26

                    5.7    
 Independent Analysis. Buyer acknowledges that it has conducted an independent
investigation of the financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company and, in making its
determination to proceed with the transactions contemplated by this Agreement,
Buyer has relied solely on (a) the results of such investigation and
(b) the terms and conditions of this Agreement, including, without
limitation, the representations and warranties of the Company and the Sellers
set forth in this Agreement and in the officer’s certificate referred to in
Section 8.1 of this Agreement. Such representations and warranties by the
Company and the Sellers constitute the sole and exclusive representations and
warranties of the Company and the Sellers to Buyer in connection with the
transactions contemplated hereby, and Buyer acknowledges and agrees that the
Company and the Sellers are not making any representation or warranty
whatsoever, express or implied, beyond those expressly given in this Agreement
and in the officer’s certificate referred to in Section 8.1 of this
Agreement.

                    
5.8     Investment Intention. Buyer is an “accredited investor” as defined under Rule 501
promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
Buyer will acquire its interest in the Company for investment only, and not
with a view toward or for sale in connection with any distribution thereof or
with any present intention of distributing or selling any interest therein,
other than in compliance with the Securities Act. Buyer understands that the
transactions contemplated hereby have not been, and will not be registered or
qualified under the Securities Act nor any state or any other applicable
securities law, by reason of a specific exemption from the registration or
qualification provisions of those laws, based in part upon Buyer’s
representations in this Agreement. Buyer understands that no part of the
interest in the Company which Buyer acquires may be resold unless such resale
is in compliance with the Securities Act, and registered or qualified under
applicable state securities laws or an exemption from such registration and
qualification is available.

                    5.9     No
Brokers. Neither Buyer nor any Person acting on Buyer’s behalf has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement that is payable by the Sellers.

ARTICLE 6

ACTIONS PRIOR TO THE CLOSING DATE

                    6.1     Consents
of Third Parties; Governmental Approvals.

                              (a)          Buyer
and the Company shall take, or cause to be taken by others, all commercially
reasonable steps to obtain and satisfy, at the earliest practicable date, all
Required Consents; provided, however, that neither the
Company nor Buyer shall be required to incur any financial or other obligation
in connection therewith, other than normal and customary transaction costs and
filing fees.

                              (b)          In
addition to and without limiting the foregoing, each of Buyer and the Company
undertakes and agrees to file as soon as practicable, and in any event prior to
fifteen (15) Business Days after the date hereof, any filings or
submissions required under any applicable foreign antitrust or trade regulation
Law. Each of Buyer and the Company shall use commercially reasonable efforts to
obtain any clearance under any applicable foreign antitrust or trade regulation
Law or to resolve any objections that may be asserted by the applicable
Governmental Authority, in each 

27

case as
promptly as practicable. Each of Buyer and the Company shall (i) promptly
notify the other party of any written communication to that party or its
Affiliates from any Governmental Authority and, subject to applicable Law,
permit the other party to review in advance any proposed written communication
to any of the foregoing, (ii) not agree to participate, or to permit its
Affiliates to participate, in any substantive meeting or discussion with any
Governmental Authority in respect of any filings, investigation or inquiry
concerning the transactions contemplated by this Agreement unless it consults
with the other party in advance and, to the extent permitted by such
Governmental Authority, gives the other party the opportunity to attend and
participate in such meeting or discussion, and (iii) to the extent
permitted under applicable Law, furnish the other party with copies of all
correspondence, filings, and written communications between such party and its
Affiliates and their respective representatives, on the one hand, and any
Governmental Authority, on the other hand, with respect to this Agreement and
the transactions contemplated hereby (unless the furnishing of such information
would (A) violate the provisions of any applicable Law or any
confidentiality agreement or (B) cause the loss of the attorney-client
privilege with respect thereto; provided that each such party shall use
its reasonable commercial efforts to promptly communicate to the other party
the substance of any such communication, whether by redacting parts of such
material communication or otherwise, so that such communication would not
violate applicable Law or cause the loss of the attorney-client privilege with
respect thereto). Buyer shall be responsible for paying all relevant filing
fees due pursuant to applicable foreign antitrust or trade regulation Law.

                              (c)          Except
as otherwise provided herein, the obligations of the parties under this
Section 6.1 shall not include any requirement of any Affiliate of either
party to expend money (other than normal legal and professional fees or filing
fees), commence or participate in any litigation or offer or grant any
accommodation (financial or otherwise) to any third Person.

                   
 6.2     Operations Prior to the Closing Date. Between the date hereof and the Closing Date, but
except as expressly contemplated herein, the Company shall, and shall cause the
Company Subsidiary (unless Buyer shall otherwise consent in writing (which
consent shall not be unreasonably withheld, delayed or conditioned)), to use
commercially reasonable efforts to: (i) conduct its operations according
to its ordinary and usual course of business consistent with past practice,
including, without limitation, to maintain in full force and effect and to pay
all premiums due under all life insurance policies under which the Company is a
beneficiary and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, (ii) seek
to preserve intact its current business organization, (iii) keep available
the services of its current officers and employees and (iv) preserve its
relationships with those customers, suppliers and others having material
business dealings with it to the end that goodwill and ongoing businesses shall
not be impaired in any material respect on the Closing Date. Without limiting
the generality of the foregoing, except as disclosed on Schedule 6.2,
the Company and the Company Subsidiary shall refrain from: 

                              (a)          amending
the certificates or articles of incorporation or by-laws (or other comparable
corporate charter documents) or taking any action with respect to any such
amendment or any recapitalization, reorganization, liquidation or dissolution
of any such corporation;

                              (b)          authorizing,
issuing, selling or otherwise disposing of any shares of capital stock (or
other comparable equity interest) of the Company or the Company Subsidiary, or modifying
or amending any right of any holder of outstanding shares of capital stock (or
other comparable equity interest) of the Company;

28

                              (c)          except
for the December Dividend, declaring, setting aside, paying or receiving any
dividend or other distribution in respect of the capital stock of the Company
or directly or indirectly redeeming, purchasing, otherwise acquiring or
receiving payment in respect of a redemption or other acquisition of, any
capital stock of the Company;

                              (d)          acquiring
or disposing of, or incurring any Encumbrance on, any assets or properties of
the Company or the Company Subsidiary, other than in the ordinary course of
business consistent with past practice;

                              (e)          (i)
entering into, amending, modifying, terminating (partially or completely),
granting any waiver under or giving any consent with respect to (A) any
Contract that would, if in existence on the date of this Agreement, be a
Business Agreement (B) any material Permit held or used by the Company or
the Company Subsidiary or (ii) granting any irrevocable powers of
attorney;

                              (f)          (i)
entering into, amending, or modifying any Benefit Plan or any agreement with
any current or former director, officer or employee, except as required by Law
or (ii) increasing the salary, wages or other compensation of (A) any
director, officer or employee of the Company or the Company Subsidiary having a
base salary in excess of $75,000 per year or any business consultant of the
Company or the Company Subsidiary or (B) any other employee of the Company
or the Company Subsidiary in an amount greater than five percent (5%) per
annum;

                              (g)          paying
any benefit or grant or amending any award (including in respect of stock
options or other equity-related award), except in the ordinary course of
business consistent with past practice or as expressly required under any Benefit
Plan existing on the date hereof and disclosed on Schedule 4.15(a);

                              (h)          violating,
breaching or defaulting under in any material respect, or taking or failing to
take any action that (with or without notice or lapse of time or both) would
constitute a material violation or breach of, or default under, any term or
provision of any Permit held or used by the Company or the Company Subsidiary
or any Contract to which the Company or the Company Subsidiary is a party or by
which any of their respective assets or properties is bound;

                              (i)          (i)
incurring indebtedness, other than Indebtedness incurred in the ordinary course
consistent with past practice, or (ii) voluntarily purchasing, canceling,
prepaying or otherwise providing for a complete or partial discharge in advance
of a scheduled payment date with respect to, or waiving any right of the
Company or the Company Subsidiary under, any indebtedness of or owing to the
Company or the Company Subsidiary; provided, that the Company and the Company
Subsidiary may deal with their respective accounts receivable in the ordinary
course of business and in accordance with past practice;

                              (j)          engaging
with any Person in any merger or other business combination;

                              (k)          making
capital expenditures or commitments for additions to property, plant or
equipment constituting capital assets in an aggregate amount exceeding $100,000;

                              (l)          making
any change in the lines of business in which the Company or the Company
Subsidiary participate or are engaged;

29

                              (m)          writing
off or writing down any of the Company’s or the Company Subsidiary’s assets or
properties outside the ordinary course of business consistent with past
practice; 

                              (n)          making
any change in any accounting or Tax practice, policy or election of the Company
or the Company Subsidiary; 

                              (o)          making
any payment to, distributing (or granting any beneficial interest in) any asset
of the Company or the Company Subsidiary (other than distribution of the
Vintage Firearms or the proceeds thereof as permitted hereunder) to, or
incurring any liability or expense on behalf of any Affiliates, officers,
directors, or shareholders of the Company or the Company Subsidiary other than
those arising in the ordinary course of business from such Persons employment
or duties as a director or as expressly provided for in a Business Agreement
disclosed on Schedule 4.13(j); or 

                              (p)          entering
into any Contract to do or engage in any of the foregoing.

                    6.3     Commercially
Reasonable Efforts. Subject to the terms and conditions of this Agreement,
each Party will use all commercially reasonable efforts to cause the Closing to
occur. Without limiting the foregoing, the Company shall use all commercially
reasonable efforts to obtain the agreement of all shareholders of the Company
to become Sellers under this Agreement.

                    6.4     Confidentiality;
Access to Information.

                    (a)     The
terms of the Confidentiality Agreement dated May 14, 2007 between Cerberus
Capital Management, L.P. and the Company (the “Confidentiality Agreement”) are hereby
incorporated herein by reference, shall apply to Buyer’s Representatives and
shall continue in full force and effect until the Closing Date, at which time
the Confidentiality Agreement and the obligations of Buyer under this
Section 6.4 shall terminate. If this Agreement is, for any reason,
terminated prior to the Closing Date, the Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.

                    (b)     Following
execution of this Agreement, upon reasonable notice, the Company and the
Company Subsidiary shall afford to officers, employees, counsel, accountants,
prospective financing sources, and other authorized representatives of Buyer (“Representatives”),
full, open, continuing and reasonable access, upon reasonable notice throughout
the period prior to the Closing Date, to its (i) equipment, personal and
intangible properties, facilities and real properties, (ii) accounting files,
financial and operating data, budgets, projections and plans, (iii) regulatory
and other government filings, (iv) employment records, policies and files, (v)
material contracts, agreements and undertakings, (vi) environmental filings and
tax returns, (vii) reports, schedules, books and records, and (viii) other
information relevant to the Company’s and the Company Subsidiary’s business,
including without limitation any Actions against the Company or the Company
Subsidiary, (collectively, the “Information”); and, during such period, the Company and
the Company Subsidiary shall furnish or make available reasonably promptly to
such Representatives copies of all such Information (in addition to the
information and materials which Buyer has previously received) as may
reasonably be requested, including but not limited to a copy of each report,
schedule or other document filed with or received by the Company or the Company
Subsidiary from any Governmental Authority at any time prior to the Closing.
The Company and the Company Subsidiary shall make reasonably available all of
its officers, employees, agents or advisors to Buyer’s Representatives for
purposes of reviewing, providing, 

30

discussing, or
describing any of the Information or otherwise keeping Buyer and its
Representatives apprised with respect to, and responding to Buyer’s inquiries
regarding, the Company’s and the Company Subsidiary’s business. Buyer agrees
that it will not, and will cause its Representatives not to, use any
information obtained pursuant to this Section for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. No information
or knowledge obtained in any investigation pursuant to this Section 6.4 shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
transactions contemplated thereby. 

                    6.5     Notification
of Certain Matters. In the event that Buyer becomes aware on or prior to
the Closing Date (whether by notification by the Company, updating of Schedules
or otherwise) of any inaccuracy in any representation or breach of any
warranty, covenant or agreement of the Company, Buyer shall promptly notify the
Company in writing, and, to the extent such inaccuracy or breach is not cured
in accordance with Section 11.1, Buyer may terminate this Agreement to the
extent Buyer is entitled to do so pursuant to Section 11.1. No notice
given pursuant to this Section 6.5 shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein or shall in any way limit Buyer’s right to seek indemnity under this
Agreement, including, without limitation, under Article 10; provided,
however,
that if the inaccuracy or breach is of a nature that would entitle Buyer to
terminate this Agreement pursuant to Section 11.1, then, notwithstanding
anything in this Agreement to the contrary, if Buyer proceeds to consummate the
Closing, Buyer shall be deemed to have waived any and all rights, remedies or
other recourse against the Company to which Buyer might otherwise be entitled
in respect of such inaccuracy or breach, including any rights or remedies under
Article 10. 

                    6.6     No
Solicitations. The Sellers will not take, nor will they permit the Company,
the Company Subsidiary or any Affiliate of any Seller or the Company (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of any
Seller, the Company, the Company Subsidiary or any such Affiliate) to take,
directly or indirectly, any action to solicit, encourage, receive, negotiate,
assist or otherwise facilitate (including by furnishing confidential
information with respect to the Company or the Company Subsidiary or permitting
access to the assets and properties and books and records of the Company or the
Company Subsidiary) any offer or inquiry from any Person concerning an
Acquisition Proposal. If, after the date hereof, any Seller, the Company, the
Company Subsidiary or any such Affiliate (or any such Person acting for or on
their behalf) receives from any Person any offer, inquiry or informational
request referred to above, a Seller or the Company will promptly advise such
Person, by written notice, of the terms of this Section 6.6 and will
promptly, orally and in writing, advise Buyer of such offer, inquiry or request
and deliver a copy of such notice to Buyer.

                    6.7     Financing
Assistance. The Company shall provide cooperation reasonably necessary in
connection with (i) Buyer’s arrangement of financing to consummate the
transactions contemplated in this Agreement and (ii) at Buyer’s option, the
repayment of all borrowings under the Webster Credit Agreement as of the
Closing (the “Acquisition Financing”),
including (a) to cause the appropriate officers of the Company and the
Company Subsidiary to participate in reasonable meetings, drafting sessions,
due diligence sessions, management presentation sessions, road shows and
sessions with rating agencies, in each case which are customary for financings
similar to the Acquisition Financing, (b) to cause the appropriate
officers of the Company and the Company Subsidiary to assist Buyer in the
preparation of business projections with respect to the business that are 

31

customary for
financings similar to the Acquisition Financing, (c) to cause the
appropriate officers of the Company and the Company Subsidiary to execute and
deliver any underwriting or placement agreements, pledge and security
documents, lien release or termination documents in connection with the repayment
of all borrowings under the Webster Credit Agreement, other definitive
financing documents, indemnity agreements, or documents or other requested
certificates (including officers’ certificates), in each case which are
customary for financings similar to the Acquisition Financing and (d) to
use commercially reasonable efforts to cause the Company’s independent
accountants to reasonably cooperate with Buyer in its efforts to arrange the
Acquisition Financing (provided no fees or expenses of such accountants
incurred for the purpose will be included in the Expense Amount), including to
provide any customary comfort letter and consent with respect to the financial
statements in connection with the Acquisition Financing as reasonably requested
by Buyer.

                    6.8     Indebtedness.
Consistent with past practice, the Company may use available cash to pay down
Indebtedness until the Closing Date, to make the payments (if any) required by
applicable Law to partially fund any underfunding under Pension Plans. The
Company shall not increase Indebtedness unless the proceeds thereof are used
prior to the Closing Date in the ordinary course business operations of the
Company or the Company Subsidiary and such increase shall not have the effect
of directly increasing Closing Cash. 

                    6.9     International
Boycott Report. Prior to the Closing Date, the Company shall have filed
with the IRS a Form 5713, International Boycott Report, for each taxable year
in which the Company or the Company Subsidiary had operations related to a
“boycotting country” as listed by the Secretary of the U.S. Treasury under Code
section 999(a)(3), and shall have provided Buyer with proof of such filing and
a copy of such completed Form 5713. 

                    6.10     Pension
Plan. Prior to the Closing, the Company shall take all such actions as are
necessary to properly effectuate a complete cessation of all future benefit
accruals under the Marlin Firearms Co. Employees’ Pension Plan, including
without limitation adopting all necessary plan amendments and providing the
required notice to plan participants under Section 204(h) of ERISA, with such
cessation to be effective as of a date no later than December 31, 2007.

                    6.11     No
Transfers. Other than in connection with the Closing, no Seller will
transfer any Shares.

                    6.12     Information
Return on Foreign Corporation Ownership. Prior to the Closing Date, the
Company shall have filed with the IRS a Form 5471, Information Return of U.S.
Persons with Respect to Certain Foreign Corporations, for each taxable year in
which the Company or the Company Subsidiary holds ten percent (10%) or more
equity interest in any foreign corporation, and, if any such filing is
required, shall have provided Buyer with proof of such filing and a copy of
such completed Form 5471. 

                    6.13     Distributions.
The Company may distribute to the Sellers the vintage firearms listed on Schedule 6.13
(the “Vintage Firearms”),
along with all documentation and accessories related thereto, and the proceeds
of the sale of those Vintage Firearms noted on Schedule 6.13 as having
been sold at auction, net of any applicable Taxes to be paid by the Company or
the Company Subsidiary and any expenses related to such sale or sales. Any such
distribution shall be subject to Section 7.5.

32

ARTICLE 7

POST-CLOSING AGREEMENTS

                    7.1     Employees,
Employee Benefits, Hiring of Employees. 

                              (a)          Continuation
of Employment. On the Closing Date, Buyer shall cause each of the Company
and the Company Subsidiary to employ all employees of the Company and the
Company Subsidiary, whether or not actively employed on the Closing Date (all
such employees, the “Business Employees”) at the same location where such
employee was employed immediately prior to the Closing Date on terms and
conditions (including premium pay, shift differentials, and Benefit Plan
coverages) that are not less favorable than those in effect immediately prior
to the Closing Date. Buyer and its Affiliates shall, for the benefit of the
Business Employees, provide credit for all years of service provided prior to
the Closing Date for all purposes under all compensation and benefit plans,
programs and policies maintained by Buyer and/or its Affiliates for the benefit
of such employees after the Closing Date to the extent such credit was given
under corresponding Benefit Plans as in existence immediately prior to the
Closing Date. 

                              (b)          Health
Coverages. Without limiting the scope of Section 7.1(a), Buyer and its
Affiliates shall cause each of the Company and the Company Subsidiary to
provide each Business Employee (and his or her “eligible dependents”, as
defined in the Benefit Plans) to be covered immediately following the Closing
Date by a group health plan that provides health benefits (within the meaning
of Section 5000(b)(1) of the Code) that (i) complies with the
provisions of Section 7.1(a), (ii) does not limit or exclude coverage
on the basis of any pre-existing condition of such Business Employee or
dependent (other than any limitation already in effect under the Benefit Plan
that is a group health plan), and (iii) provides each Business Employee
full credit, for the year during which the Closing occurs, for any deductible
already incurred by the Business Employee under any group health plan in which
the Business Employees become eligible to participate after the Closing Date
and for any other out-of-pocket expenses already incurred by the Business
Employee under the applicable Benefit Plan that count against any maximum or
minimum out-of-pocket expense provision of any group health plan maintained by
Buyer and/or its Affiliates.

                              (c)          Accrued
Paid Time Off. With respect to any accrued but unused paid time off to
which any Business Employee is eligible to take pursuant to the paid time off
policy maintained by the Company or the Company Subsidiary for the benefit of
the Business Employees applicable to such Business Employee immediately prior
to the Closing Date, Buyer shall cause the Company or the Company Subsidiary to
allow such Business Employee to use such accrued and unused paid time off
during that individual’s employment following the Closing Date (notwithstanding
any contrary program or policy of Buyer), and if such employment is terminated
prior to a Business Employee’s use of all such accrued and unused paid time
off, Buyer shall provide such individual with equivalent compensation in lieu
of such paid time off.

                              (d)          No
Third Party Beneficiaries. Nothing herein is intended to, and shall not be
construed to, create any third party beneficiary rights of any kind or nature,
including, without limitation, the right of any Business Employee or other
individual to seek to enforce any right to compensation, benefits, or any other
right or privilege of employment with Company, the Company Subsidiary or Buyer.

33

                    7.2     Indemnification
and Insurance. 

                              (a)          Buyer
agrees that all rights to indemnification and exculpation from liability for
acts and omissions occurring at or prior to the Closing and rights to
advancements of expenses relating thereto now existing in favor of the current
or former directors, officers, employees, shareholders and agents of the
Company or the Company Subsidiary (the “Company Agents”) as provided in the certificate of
incorporation and by-laws of the Company or comparable documents of the Company
Subsidiary shall survive the transactions contemplated hereby and shall not be
amended, repealed or otherwise modified in any manner that would adversely
affect the rights thereunder of any such Company Agent, unless an alteration or
modification of such document is required by applicable Law or the Company
Agent affected thereby otherwise consents in writing thereto.

                              (b)          Prior
to the Closing, the Company shall obtain the Extended Coverage Policy and the
premium therefore shall be included in the Expense Amount. 

                    7.3     Other
Tax Matters.

                              (a)          At
the Company’s sole expense, the Buyer shall cause to be prepared and filed all
federal and state income Tax Returns required to be filed by the Company or the
Company Subsidiary for taxable periods ending prior to or on the Closing Date
which are to be filed after the Closing Date.

                              (b)          Buyer
shall
promptly notify the Shareholders’ Representative following receipt of any
notice of audit or other proceeding relating to any federal or state Tax Return
for any Tax period ending on or before December 31, 2006,
and with respect to any Taxes for which the Sellers may be liable
pursuant to Section 7.3(c) (the “Prior Period Returns”). The Shareholders’
Representative shall have the right to control any and all audits or other
proceedings relating to any Prior Period Return, including the filing of an
amended return; provided, however, that the Shareholders’
Representative (i) shall have given written acknowledgement and acceptance of
the liability of the Sellers to Buyer under this Agreement for the Tax
liability being contested and (ii) shall not agree to the resolution of any
audit or other proceeding relating to a Prior Period Return or file an amended
Prior Period Return that would have a material adverse effect on the Company
without Buyer’s consent, which consent shall not be unreasonably withheld.
Buyer shall make available or shall cause the Company to make available to the
Shareholders’ Representative any and all books and records of the Company and
other documents requested by the Shareholders’ Representative and shall make
available employees of the Company to enable the Shareholders’ Representative
to defend any audit or other proceeding with respect to any Prior Period Return
and shall cooperate with the Shareholders’ Representative in defense of such
audit.

                              (c)          The
Parties agree that there should be no Tax Return required to be filed for a Straddle
Period for Taxes based on income or receipts of the Company or the Company
Subsidiary. However, in the event that any Tax Return is required to be filed
for a Straddle Period for Taxes based on income or receipts of the Company or
the Company Subsidiary, such Taxes for the portion of the Straddle Period that
ends on the Closing Date (the “Pre-Closing Straddle Period”) shall be computed as if
such Straddle Period ended as of the close of business on the Closing Date. In
the case of any Straddle Period, the periodic Taxes of the Company or the
Company Subsidiary that are not based on income or receipts (e.g., property 

34

Taxes) for the
Pre-Closing Straddle Period shall be computed based upon the ratio of the
number of days in the Pre-Closing Straddle Period and the number of days in
such Straddle Period. The Sellers shall only be liable for and shall only pay
any Taxes to the extent that such Taxes are (i) attributable to the Pre-Closing
Straddle Period and (ii) are imposed by a state in which the Company and the
Company Subsidiary have never filed and do not now file a Tax Return for the
type of Tax for which a subsequent claim is made. In the event that the Closing
occurs after December 31, 2007, the Buyer shall be liable for all Taxes for
2007 and the Pre-Closing Straddle Period, except to the extent that such Taxes
are imposed by a state in which the Company and the Company Subsidiary have
never filed and do not now file a Tax Return for the type of Tax for which a
subsequent claim is made. With respect to any Tax Return required to be filed
for a Straddle Period (and for 2007 in the event that the Closing occurs after
December 31, 2007) and for which the Sellers are liable for Taxes shown thereon
pursuant to this Section 7.3, such Tax Return shall be prepared on a basis
consistent with past practice unless otherwise required by Law and Buyer shall
deliver, at least thirty (30) days prior to the due date for the filing of such
Tax Return (taking into account extensions), to the Shareholders’ Representative,
a statement setting forth the amount of Tax for which the Sellers are
responsible pursuant to this Section 7.3, and a copy of such Tax Return; provided,
that Buyer will not be required to show any such Tax Return to the
Shareholders’ Representative where the filing date for such Tax Return has
passed when it is determined by the relevant taxing authority that such Tax
Return must be filed. The Shareholders’ Representative, on the one hand, and
Buyer, on the other hand, agree to consult and resolve in good faith any issue
arising as a result of the Shareholders’ Representative’s review of such Tax
Return and mutually to consent to the filing of such Tax Return as promptly as
possible; however, even in the case of continuing disagreement as to the amount
of Tax, in all cases, the Shareholders’ Representative, on behalf of the
Sellers, must timely pay to Buyer the amount of Tax Buyer has determined the
Sellers are liable for on such Tax Return so that Buyer can timely file such
Tax Return.

                              (d)          Transfer
Taxes. As required by state law, the Sellers shall be liable for all
transfer Taxes (including, without limitation, any transfer gains Taxes)
arising from the transactions contemplated by this Agreement. The Shareholders’
Representative shall file all Tax Returns relating to such transfer Taxes and
shall provide evidence of payment thereof at Closing. 

                              (e)          Tax
Treatment of Indemnity Payments. It is the intention of the Parties to treat
any indemnity payment made under this Agreement as an adjustment to the Total
Consideration for all federal, state, local and foreign Tax purposes, and the
Parties agree to file their Tax Returns accordingly.

                              (f)          Tax
Cooperation. After the Closing Date, the Shareholders’ Representative will
cooperate with Buyer in the preparation of all Tax Returns and will provide (or
cause to be provided) any records and other information Buyer requests, and
will provide access to, and the cooperation of its auditors. The Shareholders’
Representative will cooperate with Buyer in connection with any Tax
investigation, audit or other proceeding.

                    7.4     Management
Amount and Expense Amount. The Company shall take all actions reasonably
necessary to pay, and shall at the Closing cause to be paid, the Management
Amount to the Persons and in the amounts listed on Schedule 7.4,
subject to all applicable Employment and Withholding Taxes and the unpaid
portion of the Expense Amount.

35

                    7.5     Vintage
Firearms. If any of the Vintage Firearms have not been distributed to the
Sellers prior to the Closing, Buyer agrees that such Vintage Firearms are
beneficially owned by the Sellers. From the Closing Date until sixty
(60) days thereafter, Buyer shall cause the Company to distribute such
Vintage Firearms to certain individuals designated by the Shareholders’
Representative. The Sellers, and as applicable the distributee of any Vintage
Firearms, shall indemnify and hold harmless Buyer, the Company and the Company
Subsidiary from and against any and all Losses incurred by Buyer, the Company
or the Company Subsidiary in connection with or arising from the Vintage
Firearms or distribution thereof. 

                    7.6     Environmental.

                              (a)          Buyer shall cause the Company to (i) sign and submit the
documents required by the Transfer Act as a “Certifying Party,” (ii) develop,
implement and complete, in accordance with all applicable statutory and
regulatory requirements, a plan and a course of action to investigate and, if
necessary, monitor and remediate the North
Haven AOCs at the North Haven Property listed on the table attached to Schedule
4.16(c) to the extent required by the Transfer Act or other applicable laws
and regulations, and to the extent necessary to achieve either certification of
the Connecticut Department of Environmental Protection or a licensed
environmental professional (to the extent such certifications are available
under applicable Environmental Laws) that those activities required under the
Transfer Act have been completed in accordance with the Remediation Standard
Regulations (Section 22a-133k-1 et seq. of the Regulations of Connecticut State
Agencies) given the then current use of the North Haven Property, (iii) pay all
legal, consulting and other fees and expenses in connection with the foregoing,
and (iv) pay all remediation and other costs and expenses arising out of the
activities contemplated by this Section 7.6 or otherwise arising in connection
with the North Haven AOCs.

                              (b)          None of the provisions of this Section 7.6 shall limit the
indemnification obligations of the Sellers under Section 10.1 of this
Agreement; provided,
however,
that the Sellers shall have no indemnification obligation with respect to the
existence of any Hazardous Substances or noncompliance with Environmental Laws
to the extent such existence or noncompliance arises from one or more of the
AOCs, whether or not investigation, monitoring or remediation is required in
connection with any AOC.

                              (c)          Prior
to commencing any investigation, monitoring, remediation or other environmental
work at or in connection with the AOCs, Buyer shall, so long as the Sellers
have an obligation under this Agreement to indemnify Buyer, the Company or the
Company Subsidiary for environmental matters, provide the Shareholder
Representative with a description of the scope of such work and a schedule of
such work, and thereafter will keep the Shareholder Representative and its
consultants and advisers reasonably informed as to any changes in such scope or
schedule. The Shareholder Representative shall have the right, at the
Shareholder Representative’s expense, to have the Shareholder Representative’s
environmental consultants present during the conduct of such work, and Buyer’s
environmental consultants and legal counsel shall keep the Shareholder
Representative and his environmental consultants and counsel reasonably
informed as to such work (including the results of any investigation or
testing) and all material discussions with the relevant governmental agencies
relating to such work. The Shareholder’s Representative shall indemnify, defend
and hold harmless Buyer, the Company and the Company Subsidiary from any
liability or damage caused by the negligence or willful 

36

misconduct of the Shareholder
Representative or any of its employees, agents or contractors in the course of
its participation pursuant to this Section 7.6(c).

ARTICLE
8

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

                    The
obligations of Buyer under this Agreement shall, at the option of Buyer, be
subject to the satisfaction or waiver, on or prior to the Closing Date, of the
following conditions:

                    8.1     No
Misrepresentation or Breach of Covenants and Warranties. The
representations and warranties of the Company and the Sellers made in this
Agreement (reading such representation and warranty without regard to any
Material Adverse Effect or materiality qualification) shall be true and correct
in all respects: (a) as of the date hereof; and (b) on and as of the
Closing Date, as though made on such date, except (in the case of both clauses
(a) and (b) above) (i) for those representations and warranties that are
made as of a specific date (which shall be true and correct as of such
respective date) and (ii) to the extent any breaches of such
representations and warranties would not individually or in the aggregate be
reasonably likely to have a Material Adverse Effect. The Company and the
Sellers shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by the Company on or before the Closing Date, and the Company
shall have delivered to Buyer a certificate dated the Closing Date and signed
by an authorized officer of the Company confirming the foregoing. Each Seller
shall have delivered to Buyer certificates representing all of the Shares set
forth opposite such Seller’s name on Schedule 1.1 duly endorsed in blank
and bearing or accompanied by all requisite stock transfer stamps. 

                    8.2     No
Injunction. There shall not be in effect on the Closing Date any Court
Order restraining or enjoining the carrying out of this Agreement or the
consummation of the transactions contemplated by this Agreement.

                    8.3     Required
Consents. The consents, approvals, waivers and notices set forth on Schedule 8.3
shall have been obtained (the “Required Consents”).

                    8.4     Escrow
Agreement. The Shareholders’ Representative (on behalf of the Shareholders)
and the Escrow Agent shall have executed and delivered the Escrow Agreement.

                    8.5     Trademark
Agreement. The Marlin Company shall have executed and delivered the
Trademark Coexistence Agreement attached hereto as Exhibit C (the “Trademark Coexistence Agreement”).

                    8.6     Laws.
There shall not be in effect on the Closing Date any Law that became effective
after the date of this Agreement prohibiting or making illegal the consummation
of any of the transactions contemplated by this Agreement. 

                    8.7     Parachute
Payments. Buyer shall have received evidence, in form and substance reasonably
satisfactory to Buyer, that the Company shall have taken all actions necessary
to satisfy the “shareholder approval requirements” of Section 280G(b)(5)(B) of
the Code and the regulations thereunder with respect to any payment that, as a
result of the execution of this Agreement or the consummation of
the transactions contemplated by this Agreement, either alone or in 

37

conjunction with any other event,
could be required to be made under any Contract or arrangement or
otherwise which alone or together with all other payments could constitute
a “parachute payment” to any “disqualified individual” as those terms are
defined in Section 280G of the Code (whether or not such payment is considered
to be reasonable compensation for services rendered).

                    8.8     Release
of Liens. If Buyer elects to proceed pursuant to Section 6.7(ii), all
Encumbrances under the Webster Credit Agreement and any related security
documents shall be released and discharged upon such repayment.

                    8.9     Resignation
of Directors. All directors of the board of directors of the Company whose
resignation shall have been requested in writing by Buyer not less than five
(5) days prior to the Closing Date shall have submitted their resignations or
been removed from office effective as of the Closing Date. 

                    8.10   Non-Competition
Agreement. Frank Kenna, III, shall have executed and delivered the
non-competition agreement attached hereto as Exhibit D (the “Non-Competition Agreement”).

                    8.11   Waiver
and Termination Agreement. The Waiver and Termination Agreement shall be in
full force and effect in accordance with its terms. 

                    8.12   Required
Sellers. Shareholders of the Company holding at least ninety-nine percent
(99%) of the issued and outstanding Shares shall have become bound as Sellers
hereunder.

                    8.13   Waiver.
Notwithstanding the failure of any one or more of the foregoing conditions in
this Article 8, Buyer may proceed with the Closing without satisfaction,
in whole or in part, of any one or more of such conditions and without written
waiver. To the extent that, at the Closing, the Company delivers to Buyer a
written notice specifying in reasonable detail the failure of any such
conditions, and Buyer nevertheless proceeds with the Closing, Buyer shall be
deemed to have waived for all purposes any rights or remedies it may have
against the Sellers (including any rights or remedies under Article 10) by
reason of the failure of any such conditions to the extent described in such
notice; provided,
however,
for the avoidance of doubt, no such waiver shall in any way limit Buyer’s right
to seek indemnity under this Agreement, including, without limitation, under
Article 10 for breaches of any representation, warranty, covenant or
agreement contained in this Agreement to the extent such breach does not
represent a failure of a condition. 

ARTICLE
9

CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY

                    The
obligations of the Company under this Agreement shall, at the option of the
Company, be subject to the satisfaction or waiver, on or prior to the Closing
Date, of the following conditions:

                    9.1     No
Misrepresentation or Breach of Covenants and Warranties. The
representations and warranties of Buyer made in this Agreement shall be true
and correct in all material respects: (a) as of the date hereof; and (b) on
and as of the Closing Date, as though made on such date, except to the extent
any breaches of such representations and warranties would not individually or
in 

38

the aggregate be reasonably likely
to have a material adverse effect. Buyer shall have performed or complied in
all material respects with all obligations and covenants required by this
Agreement to be performed or complied with by Buyer on or before the Closing
Date, and Buyer shall have delivered to the Company a certificate dated the Closing
Date and signed by an authorized officer of Buyer confirming the foregoing.

                    9.2     Required
Consents. The Required Consents shall have been obtained.

                    9.3     No
Injunction. There shall not be in effect on the Closing Date any Court
Order restraining or enjoining the carrying out of this Agreement or the
consummation of the transactions contemplated by this Agreement.

                    9.4     Escrow
Agreement. Buyer and the Escrow Agent shall have executed and delivered the
Escrow Agreement. 

                    9.5     Trademark
Agreement. The Company shall have executed and delivered the Trademark
Coexistence Agreement. 

                    9.6     Laws.
There shall not be in effect on the Closing Date any Law that became effective
after the date of this Agreement prohibiting or making illegal the consummation
of any of the transactions contemplated by this Agreement.

ARTICLE
10

INDEMNIFICATION

                    10.1     Indemnification
by the Sellers. 

                    (a)     After
the Closing Date and subject to the limitations set forth herein, (i) the
Sellers shall indemnify and hold harmless Buyer, the Company and the Company
Subsidiary from and against any and all Losses incurred by Buyer, the Company
or the Company Subsidiary in connection with or arising from: (x) any
breach of any warranty or the inaccuracy of any representation of the Company
or the Sellers contained in this Agreement, (y) any breach by the Company
or the Sellers of, or failure by the Company or the Sellers to perform, any of
its covenants or obligations contained in this Agreement (determined in all
cases under clauses (x) and (y) as if the limitations by the terms
“material” or “materially”, or any derivation thereof, were not included
therein or in the Schedules related thereto), and (z) actions taken within
eighteen (18) months of the Closing Date to ensure that the Company’s and the
Company Subsidiary’s operations are conducted in substantial compliance with
Firearms Regulations; provided, however, that: 

                              (i)          The
Sellers shall be required to indemnify and hold harmless under clauses (x)
and (z) of this Section 10.1(a), with respect to Losses only to the
extent that: (A) the amount of the Losses related to each individual claim
or series of related claims arising out of the same facts, events or
circumstances exceeds Twenty-Five Thousand Dollars ($25,000) which shall not be
applied against the Threshold Amount; and (b) the aggregate amount of such
Losses exceed Five Hundred and Twenty Thousand Dollars ($520,000) (the “Threshold Amount”),
in which event Buyer shall be entitled to claim indemnity for the full extent
of such Losses related to individual claims or series of related claims arising
out of the same facts, events or circumstances exceeding $25,000;

39

                              (ii)          (A)
The aggregate amount required to be paid by the Sellers under clause (z) of
this Section 10.1(a) shall not exceed an amount equal to Two Hundred Thousand
Dollars ($200,000) and (B) the aggregate amount required to be paid by the
Sellers collectively under clauses (x) and (z) of this
Section 10.1(a) shall not exceed an amount equal to Five Million Two
Hundred Thousand Dollars ($5,200,000); provided, however, that the
limitations set forth in this clause (ii) and in clause (i) above
shall not apply to a claim pursuant to Section 10.1 relating to
(A) any breach of any warranty or the inaccuracy of any representation set
forth in Section 3.1 (Sellers Authority and Enforceability), Section 4.2
(Authority and Enforceability), Section 4.4 (Capitalization) or
Section 4.8 (Taxes) or (B) any breach of any warranty or the
inaccuracy of any representation that constitutes fraud; and

                              (iii)          Each
Seller shall be severally liable in accordance with their pro rata share of the
Escrow Amount, until the release of the escrow funds, if any remaining, in
accordance with the terms and provisions of the Escrow Agreement. After such
release of any escrow funds, each Seller shall be severally liable for all
Losses, as determined based on the percentage of the total number of Shares
held by such Seller as set forth on Schedule 1.1, for all Losses subject
to the limitations set forth in clauses (i) and (ii) above. 

                              (b)          After
the Closing Date, the Sellers will indemnify and hold harmless Buyer, the
Company and the Company Subsidiary, from and against any Expense Amount or
Management Amount not set forth in the Expense Statement.

                              (c)          For
purposes of Section 10.1(a)(z), Losses shall include any expenses incurred or
paid by the Company (which shall not include any allocation for time spent by
the Company’s or the Company Subsidiary’s employees) in connection with any
actions taken since July 1, 2007 to ensure that the Company’s and the Company
Subsidiary’s operations are conducted in substantial compliance with Firearms
Regulations.

                    10.2     Indemnification
by Buyer. After the Closing Date and subject to the limitations set forth
herein, Buyer agrees to indemnify and hold harmless each Seller from and
against any and all Losses incurred by such Seller in connection with or
arising from: (a) any breach of any warranty or the inaccuracy of any
representation of Buyer contained in this Agreement, and (b) any breach by
Buyer of, or failure by Buyer to perform, any of its covenants or obligations
contained in this Agreement. 

                    10.3     Tax
Indemnification. After the Closing Date, the Sellers shall indemnify and
hold harmless Buyer, the Company and the Company Subsidiary, from and against
any and all Losses and reasonable out-of-pocket expenses and costs resulting
from, arising out of or relating to (a) any Taxes of the Company relating
to (i) any Tax periods ending on or before December 31, 2006 and (ii) the
Pre-Closing Straddle Period pursuant to Section 7.3(c) and (b) without
duplication of amounts included in clause (a) any Taxes resulting from a
breach of the representations in Section 4.8. The indemnity provided in
the foregoing sentence shall include, without limitation, any Tax liability
arising (A) by reason of the Company being severally liable for any Taxes
of another Person pursuant to Treasury Regulation §1.1502-6 or any analogous
state, local or foreign Tax provision, (B) by Contract as a transferee or
otherwise and (C) in connection with the transactions contemplated by this
Agreement, but shall exclude any Taxes attributable to transactions not in the
ordinary course of business occurring after the closing which are effectuated
or initiated by Buyer after the Closing. 

40

                    10.4     Notice
of Claims. 

                              (a)          Any
party seeking indemnification hereunder (the “Indemnified Party”) shall give promptly to
the party obligated to provide indemnification to such Indemnified Party (the “Indemnitor”) (it
being understood, however, that where the Sellers would otherwise be the Indemnified
Parties or Indemnitors, all references to such term as used in the procedural
provisions of this Section 10.4 and in Section 10.5 shall instead
refer to the Shareholders’ Representative) a written notice (a “Claim Notice”)
describing in reasonable detail the facts giving rise to the claim for
indemnification hereunder and shall include in such Claim Notice (if then
known) the amount or the method of computation of the amount of such claim, and
a reference to the provision of this Agreement or any other agreement, document
or instrument executed hereunder or in connection herewith upon which such
claim is based; provided, however, that the failure of any
Indemnified Party to give the Claim Notice promptly as required by this
Section 10.4(a) shall not affect such Indemnified Party’s rights under
this Article 10 except if, and only to the extent that, the Indemnitor’s
ability to defend has been materially prejudiced by such failure of the
Indemnified Party.

                              (b)          After
the giving of any Claim Notice pursuant hereto, the amount of indemnification
to which an Indemnified Party shall be entitled under this Article 10
shall be determined: (i) by written agreement between the Indemnified
Party and the Indemnitor; (ii) by a final judgment or decree of any court
of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall mutually agree in writing. The
judgment or decree of a court shall be deemed final when the time for appeal,
if any, shall have expired and no appeal shall have been taken or when all
appeals taken shall have been finally determined. The Indemnified Party shall
have the burden of proof in establishing the amount of Losses suffered by it.
All amounts due to the Indemnified Party as so finally determined shall be paid
by wire transfer within five (5) days after such final determination.

                    10.5     Third
Person Claims. 

                              (a)          In
order for a Person to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim or demand
made by any third Person against the Indemnified Party, such Indemnified Party
must notify the Indemnitor in writing, and in reasonable detail, of the third
Person claim with reasonable promptness after receipt by such Indemnified Party
of written notice of the third Person claim. Thereafter, the Indemnified Party
shall deliver to the Indemnitor, with reasonable promptness after the Indemnified
Party’s receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the third Person claim
(or in the case of court papers, within such time as may be necessary to enable
the Indemnitor to respond to court proceedings on a timely basis); provided,
however,
that the failure of any Indemnified Party to give prompt notice of a claim or
to promptly deliver copies of all notices and documents as required by this
Section 10.5(a) shall not affect such Indemnified Party’s rights under
this Article 10 except if, and only to the extent that, the Indemnitor’s
ability to defend has been materially prejudiced by such failure of the
Indemnified Party.

                              (b)          In
the event of the initiation of any legal proceeding against the Indemnified
Party by a third Person, the Indemnitor shall have the sole and absolute right
after the receipt of notice, at its option and at its own expense, to be
represented by counsel of its choice (which shall be a firm experienced in the
type of matter giving rise to the legal proceeding and which counsel 

41

shall be reasonably satisfactory to
the Indemnitor) and to control, defend against, negotiate and otherwise deal
with any proceeding, claim, or demand which relates to any loss, liability or
damage indemnified against hereunder; provided, however, (i) the
Indemnitor will be deemed to have waived its right to dispute its liability to
the Indemnified Party with respect to any third party claim as to which it
elects to control the defense, (ii) that all such proceedings, claims or
demands to which the Indemnitor elects to control the defense of shall be
vigorously and diligently prosecuted by the Indemnitor and (iii) that the
Indemnified Party may participate in any such proceeding with counsel of its
choice and at its expense. If the Indemnitor does not assume control of the
defense of a third Person claim, or abandons or fails to diligently pursue the
defense of a third Person claim, the Indemnified Party shall have the right to
control such defense. The party controlling the defense of such third Person
claim (the “Controlling Party”)
shall keep the non-Controlling Party advised of the status of such third Person
claim and the defense thereof and shall consider in good faith the
recommendations made by the non-Controlling Party with respect thereto. To the
extent the Indemnitor elects not to defend such proceeding, claim or demand,
and the Indemnified Party defends against or otherwise deals with any such
proceeding, claim or demand, the Indemnified Party may retain counsel, at the
expense of the Indemnitor, and control the defense of such proceeding. If the
Indemnitor elects to assume control of the defense of a third Person claim, any
fees and expenses of legal counsel employed by the Indemnified Party with
respect to such third Person claim shall be considered Losses for which the
Indemnified Party may be entitled to indemnification under this Article 10
only if the named parties in such third Person claim include both the
Indemnitor and the Indemnified Party and the Indemnified Party has been advised
by legal counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Indemnitor or
the Indemnified Party has been advised in writing by legal counsel that they
should be represented by separate counsel because a conflict exists between the
Indemnitor and the Indemnified Party. Neither the Indemnitor nor the
Indemnified Party may settle or compromise any such proceeding, which
settlement or compromise obligates the other party to pay money, to perform
obligations or to admit liability without the written consent of the other
party, such consent not to be unreasonably withheld or delayed.

                              (c)          The
parties agree to cooperate fully with each other in connection with the
defense, negotiation or settlement of any such legal proceeding, claim or
demand. Such cooperation shall include the retention and the provision of
records and information which is reasonably relevant to such third Person
claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.

                              (d)          After
any final Court Order shall have been rendered and the time in which to appeal
therefrom has expired, or a settlement shall have been consummated, or the
Indemnified Party and the Indemnitor shall arrive at a mutually binding
agreement with respect to each separate matter alleged to be indemnifiable by
the Indemnitor hereunder, the Indemnified Party shall forward to the Indemnitor
notice of any sums due and owing by it with respect to such matter and the Indemnitor
shall pay all of the sums so owing to the Indemnified Party by wire transfer
within five (5) days after the date of such notice.

                    10.6     Limitations.

                              (a)          For
purposes of determining the amount of any Losses, such amount shall be reduced
by the amount of any insurance benefits and proceeds actually paid to Buyer,
Company or the Company Subsidiary in respect of the Losses (net of any
deductible amounts).

42

                              (b)          In
calculating any Losses there shall be deducted (i) any indemnification,
contribution or other similar payment actually recovered by the Indemnified
Party or any Affiliate thereof from any third Person with respect thereto,
(ii) any Tax benefit or refund actually received by the applicable
Indemnified Party or any Affiliate thereof as a result of such Losses in the
Tax year any such Loss is suffered, which Tax benefit shall be calculated based
on the actual reduction in the Tax liability of the Indemnified Party or any
Affiliate thereof as shown on its Tax returns as filed for that Tax year, and
(iii) the fair market value of any asset, right or other benefit of the
Company or the Company Subsidiary which is discovered after the Closing Date to
the extent that such asset or right was not reflected on the Most Recent
Financial Statements. Any such amounts or benefits received by an Indemnified
Party or any Affiliate thereof with respect to any indemnity claim after it has
received an indemnity payment hereunder shall be promptly paid over to the
Indemnitor; provided
that the Indemnified Party shall not be obligated to pay over any such amount
or benefit in excess of the amount paid by the Indemnitor to the Indemnified
Party with respect to such claim.

                              (c)          Except
for remedies that cannot be waived as a matter of Law and injunctive and
provisional relief, if the Closing occurs, this Article 10 shall be the
sole and exclusive remedy for breach of, or inaccuracy in, any representation,
warranty, covenant or agreement contained herein or in the officer’s
certificate referred to in Section 8.1, or otherwise in respect of the
transactions contemplated hereby.

                              (d)          No
party shall have any liability for any special, exemplary, punitive or
consequential damages (including loss of profit or revenue) suffered or
incurred by any other party.

                    10.7     Mitigation.
Each of the Parties agrees to take all reasonable steps to mitigate their
respective Losses upon and after becoming aware of any event or condition which
could reasonably be expected to give rise to any Losses that are indemnifiable
hereunder.

                    10.8     Subrogation.
Upon making any payment to the Indemnified Party for any indemnification claim
pursuant to this Article 10, the Indemnitor shall be subrogated, to the
extent of such payment, to any rights which the Indemnified Party may have
against any third parties with respect to the subject matter underlying such
indemnification claim and the Indemnified Party shall assign any such rights to
the Indemnitor.

                    10.9     No
Offset. The rights of each Seller under this Agreement shall not be subject
to offset, counterclaim or deduction.

ARTICLE
11

TERMINATION

                    11.1     Termination.

                              (a)          Notwithstanding
anything contained in this Agreement to the contrary, this Agreement may be
terminated at any time prior to the Closing Date:

                              (i)          by
the Company by giving written notice to Buyer on or after sixty (60) days
after the date of this Agreement, if any of the conditions set forth in
Article 9 is not satisfied or waived by such date or has become incapable
of fulfillment, unless such satisfaction has been frustrated or made impossible
by any act or failure to act by the Company; provided, however,
in the 

43

event that the waiting period under
any applicable foreign antitrust or trade regulation Law shall not have expired
or terminated on or before sixty (60) days after the date of this
Agreement, such date shall be extended for an additional fifteen
(15) days;

                              (ii)          by
Buyer, by giving written notice to the Company on or after sixty (60) days
after the date of this Agreement, if any of the conditions set forth in
Article 8 is not satisfied or waived by such date or has become incapable
of fulfillment, unless such satisfaction has been frustrated or made impossible
by any act or failure to act by Buyer; provided, however, in the event that
the waiting period under any applicable foreign antitrust or trade regulation
Law shall not have expired or terminated on or before sixty (60) days
after the date of this Agreement, such date shall be extended for an additional
fifteen (15) days;

                              (iii)          by
the Company, by giving written notice to Buyer at any time, if Buyer has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement and such breach has not been cured within thirty
(30) days after the Company’s notice to Buyer of such breach or, if cure
is not possible within thirty (30) days, if cure has not been commenced
and is not being diligently pursued within thirty (30) days after such
notice;

                              (iv)          by
Buyer, by giving notice to the Company at any time, if the Company or a Seller
has breached any representation, warranty, covenant or agreement contained in
this Agreement that results in a Material Adverse Effect (it being understood
that any materiality or Material Adverse Effect qualification in any
representation and warranty shall be disregarded in determining whether any
such breach would have a Material Adverse Effect for purposes of this
Section 11.1(a)(iv)) and such breach has not been cured within thirty
(30) calendar days after Buyer’s notice to the Company of such breach (“Buyer’s Breach Notice”)
or, if cure is not possible within thirty (30) calendar days, if cure has
not been commenced and is not being diligently pursued within thirty
(30) calendar days after Buyer’s Breach Notice; or

                              (v)          by
mutual written agreement of the Company and Buyer.

                              (b)          In
the event of termination of this Agreement pursuant to Section 11.1(a), no
party shall have any liability or further obligation to any other party, and no
party shall be entitled to any monetary damages or injunctive relief (including
specific performance) as a result of such termination, or any indemnification
under Article 10; provided, however, that (i) upon
termination of this Agreement pursuant to Section 11.1(a)(iii) as a result of a
breach by Buyer, Buyer will remain liable to the Company for any willful breach
of this Agreement by Buyer existing at the time of such termination for the
Company’s actual out-of-pocket expenses up to $500,000 incurred in connection
with the Confidentiality Agreement, this Agreement and the transactions
contemplated hereby, (ii) upon termination of this Agreement pursuant to
Section 11.1(a)(iv) as a result of a breach by the Company or a Seller, the
Company will remain liable to Buyer for any willful breach of this Agreement by
the Company or a Seller existing at the time of such termination for Buyer’s
actual out-of-pocket expenses up to $1,000,000 incurred in connection with the
Confidentiality Agreement, this Agreement and the transactions contemplated
hereby and (iii) in no event shall any termination of this Agreement limit or
restrict the rights and remedies of any party against any other party which has
willfully breached any of the agreements or other provisions of this Agreement
prior to the termination hereof; and provided further, that the provisions
of Section 6.4 (Confidentiality; Access to Information) and
Article 12 (General Provisions) shall remain in full force and effect. 

44

ARTICLE 12

GENERAL PROVISIONS 

                    12.1          
Shareholders’ Representative.  

                                     (a)          For
purposes of this Agreement and the Escrow Agreement, the Sellers hereby
designate Frank Kenna, III, to serve as the sole and exclusive representative
of the Sellers (the “Shareholders’ Representative”) from and after the
Closing Date with respect to the matters set forth in this Agreement, such
service to be without compensation except for the reimbursement by the Sellers
of out-of-pocket expenses and indemnification specifically provided herein. The
Sellers shall be bound by any and all actions taken by the Shareholders’
Representative on their behalf, including without limitation payments made
pursuant to Article 10 hereof. Notwithstanding anything to the contrary
contained in this Agreement, the Shareholders’ Representative shall have no
duties or responsibilities except those expressly set forth herein, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on behalf of the Company or any Seller shall otherwise exist
against the Shareholders’ Representative. Except as expressly provided in this
Agreement, the Shareholders’ Representative shall have no duties or
responsibilities to Buyer or its Affiliates.

                                     (b)          The
Shareholders’ Representative shall promptly deliver to each Seller any notice
received by the Shareholders’ Representative concerning this Agreement or the
Escrow Agreement.

                                     (c)          Neither
the Shareholders’ Representative nor any agent employed by the Shareholders’
Representative shall be liable to any Seller relating to the performance of
such Shareholders’ Representative’s duties under this Agreement or the Escrow
Agreement or for any errors in judgment, negligence, oversight, breach of duty
or otherwise except to the extent it is finally determined in a court of
competent jurisdiction by clear and convincing evidence that the actions taken
or not taken by the Shareholders’ Representative constituted fraud or were
taken or not taken in bad faith. The Shareholders’ Representative shall be
indemnified and held harmless by the Sellers against all losses, including
costs of defense, paid or incurred in connection with any action, suit,
proceeding or claim to which the Shareholders’ Representative is made a party
by reason of the fact that the Shareholders’ Representative was acting as the
Shareholders’ Representative pursuant to this Agreement; provided, however,
that the Shareholders’ Representative shall not be entitled to indemnification
hereunder to the extent it is finally determined in a court of competent
jurisdiction by clear and convincing evidence that the actions taken or not
taken by the Shareholders’ Representative constituted fraud or were taken or
not taken in bad faith. The Shareholders’ Representative shall be protected in
acting upon any notice, statement or certificate believed by the Shareholders’
Representative to be genuine and to have been furnished by the appropriate
Person and in acting or refusing to act in good faith on any matter. Neither
the Shareholders’ Representative nor any agent employed by the Shareholders’
Representative shall be liable to Buyer or any Affiliate of Buyer by reason of
this Agreement or the performance of the Shareholders’ Representative’s duties
hereunder or otherwise.

                                     (d)          Buyer
shall be entitled to rely upon any action taken by the Shareholders’
Representative as the duly authorized action of the Shareholders’
Representative on behalf of each Seller with respect to any matter set forth in
this Agreement or the Escrow Agreement. All notices to be sent to the Sellers
pursuant to this Agreement and the Escrow Agreement may be 

45

addressed to
the Shareholders’ Representative only, and any notice so sent shall be deemed
notice to all of the Sellers hereunder. The Sellers hereby consent and agree
that the Shareholders’ Representative is authorized to accept notice on behalf of
all of the Sellers pursuant hereto.

                                     (e)          The
Shareholders’ Representative is hereby appointed and constituted the true and
lawful attorney-in-fact of each Seller, with full power in its name and on its
behalf to act according to the terms of this Agreement in the absolute
discretion of the Shareholders’ Representative, and in general to do all things
and to perform all acts including, without limitation, executing and delivering
all agreements, waivers, amendments, certificates, receipts, instructions and
other instruments contemplated by or deemed advisable in connection with this
Agreement. This power of attorney and all authority hereby conferred is granted
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Seller or by
operation of Law, whether by death or any other event.

                    12.2          Survival
of Covenants, Representations and Warranties. No covenant or agreement
contained herein to be performed prior to the Closing Date shall survive the
Closing Date and any covenant and agreement to be performed after the Closing
Date shall survive the Closing indefinitely, except as otherwise provided
herein. Except as expressly provided otherwise herein, each representation and
warranty contained herein shall survive the Closing until, and will expire and
be of no force and effect on the date that is eighteen (18) months after
the Closing Date, with the exception of (i) each representation and warranty
contained in Sections 4.8 (Taxes), which shall survive the Closing until
thirty (30) days after the date at which the relevant Tax notice has
become unappealable and binding under the relevant jurisdiction, whichever
period is shorter, without giving effect to any waiver, mitigation or extension
thereof, and (ii) each representation and warranty contained in Section
4.15 (Employee Benefits), which shall survive the Closing until the fourth (4th) anniversary
of the Closing Date.

                    12.3          No
Public Announcement. From the date of this Agreement, neither Buyer (and
after the Closing, the Company), on the one hand, nor any Seller (and prior to
the Closing, the Company), on the other hand, shall, without the written
approval of the other (it being agreed that the Shareholders’ Representative
shall have the right to grant consents on behalf of the Sellers), make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such party
shall be so obligated by applicable Law, in which case such party shall allow
the other party reasonable time to comment on such release or announcement and
the Parties shall use their reasonable efforts to cause a mutually agreeable
release or announcement to be issued; provided, however, that the foregoing
shall not preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with any Law, accounting or
Securities and Exchange Commission disclosure obligations or the rules of any
stock exchange or national market system.

                    12.4          Notices.
All notices or other communications required or permitted hereunder shall be in
writing and shall be deemed given or delivered (a) when delivered
personally, against written receipt, (b) if sent by registered or
certified mail, return receipt requested, postage prepaid, when received,
(c) when received by facsimile transmission, if confirmed by the other
means described in clause (a) or (b), and (c) when delivered by a
nationally recognized overnight courier service, prepaid, and shall be
addressed as follows:

46

	
 

	
 

	
 

	
 

	
If to the
 Company, to:

	
 

	
 

	
 

	
 

	
 

	
The Marlin
 Firearms Company

	
 

	
 

	
P.O. Box 248

	
 

	
 

	
North Haven,
 CT 06473-0905

	
 

	
 

	
Attention:
 Robert Behn

	
 

	
 

	
Facsimile:
 (203) 234-7991

	
 

	
 

	
 

	
 

	
with a copy
 to:

	
 

	
 

	
 

	
 

	
 

	
Wiggin and
 Dana LLP

	
 

	
 

	
One Century
 Tower

	
 

	
 

	
265 Church
 Street

	
 

	
 

	
New Haven,
 CT 06508-1832

	
 

	
 

	
Attention:
 D. Terence Jones, Esq.

	
 

	
 

	
Facsimile:
 (203) 782-2889

	
 

	
 

	
 

	
 

	
If to a
 Seller, to the Shareholders’ Representative:

	
 

	
 

	
 

	
 

	
 

	
The Marlin
 Company

	
 

	
 

	
P.O. Box 248

	
 

	
 

	
North Haven,
 CT 06473-0905

	
 

	
 

	
Attention:
 Frank Kenna, III

	
 

	
 

	
Facsimile:
 (203) 234-7991

	
 

	
 

	
 

	
 

	
with a copy
 to:

	
 

	
 

	
 

	
 

	
 

	
Wiggin and
 Dana LLP

	
 

	
 

	
One Century
 Tower

	
 

	
 

	
265 Church
 Street

	
 

	
 

	
New Haven,
 CT 06508-1832

	
 

	
 

	
Attention:
 D. Terence Jones, Esq.

	
 

	
 

	
Facsimile:
 (203) 782-2889

	
 

	
 

	
 

	
 

	
If to Buyer,
 to:

	
 

	
 

	
 

	
 

	
 

	
Remington
 Arms Company, Inc.

	
 

	
 

	
870
 Remington Drive

	
 

	
 

	
Post Office
 Box 700

	
 

	
 

	
Madison,
 North Carolina 27025

	
 

	
 

	
Attention:
 Steve Jackson 

	
 

	
 

	
Facsimile:
 (336) 548-7833

	
 

	
 

	
 

	
 

	
with a copy
 to:

	
 

	
 

	
 

	
 

	
 

	
Cerberus
 Capital Management, L.P.

	
 

	
 

	
299 Park
 Avenue

	
 

	
 

	
New York,
 New York 10171

	
 

	
 

	
Attention:
 George K. Kollitides, Managing Director

47

	
 

	
 

	
 

	
 

	
 

	
Facsimile:
 (212) 284-7916

	
 

	
 

	
 

	
 

	
 

	
and

	
 

	
 

	
 

	
 

	
 

	
Milbank,
 Tweed, Hadley & McCloy LLP

	
 

	
 

	
1 Chase
 Manhattan Plaza

	
 

	
 

	
New York,
 New York 10005

	
 

	
 

	
Attention:
 Roland Hlawaty, Esq.

	
 

	
 

	
Facsimile:
 (212) 822-5735

or to such
other address as such party may indicate by a written notice delivered to the other
Parties.

                    12.5          Successors
and Assigns. The rights of a party under this Agreement shall not be
assignable by such party without the written consent of the other Parties (it
being agreed that the Shareholders’ Representative shall have the right to
grant consents on behalf of the Sellers); provided, however, that Buyer may
assign this Agreement and its rights and obligations hereunder to an Affiliate
of Buyer, but no such assignment shall relieve Buyer of its obligations hereunder.
This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any Person other than the Parties any right, remedy or claim under or by
reason of this Agreement.

                    12.6          Access
to Records and Employees after Closing. 

                                     (a)          For
a period of ten (10) years after the Closing Date, the Sellers shall have
reasonable access to all of the books and records of the Company (including any
books and records relating to Taxes and Tax Returns of the Company and the
Company Subsidiary), to the extent that such access may reasonably be required
by a Seller in connection with matters relating to or affected by the
operations of each of the Company and the Company Subsidiary prior to the
Closing Date, including the preparation of the Seller’s financial reports or
Tax Returns, any Tax audits, the defense or prosecution of litigation
(including arbitration or mediation), and any other reasonable need of the
Sellers to consult such books and records. Such access shall be afforded by
Buyer upon receipt of reasonable advance notice and during normal business
hours. The Seller seeking access shall be solely responsible for any costs or
expenses incurred by it pursuant to this Section 12.6(a). If any such
books or records, or any other documents which the Sellers have the right to
have access to pursuant to this Section 12.6(a) are produced by Buyer, the
Company or the Company Subsidiary to an actual or potentially adverse party (e.g.,
in litigation or in connection with a government investigation), Buyer shall
endeavor to immediately make all such books, records and/or documents produced
available for inspection and copying by the Sellers concurrently with the
production of such books, records and/or documents. In addition, if Buyer, the
Company or the Company Subsidiary shall desire to dispose of any of such books
or records prior to the expiration of such ten (10) year period, Buyer
shall, prior to such disposition, give the Sellers a reasonable opportunity, at
the Company’s expense, to segregate and remove such books and records as the
Sellers may select.

                                     (b)          Buyer
shall provide to any Seller so requesting, reasonable assistance, at the
Seller’s actual expense, by providing employees of the Company or the Company
Subsidiary to 

48

act as
witnesses and preparing documents, reports and other information requested by
the Seller in support of the activities described in Section 12.6(a).

                                     (c)          Any
Seller may retain copies of any Contracts, documents or records: (i) which
relate to properties or activities of such Seller other than the Company or the
Company Subsidiary, or (ii) which are required to be retained pursuant to
any legal requirement or are subject to the attorney-client privilege, or for
financial reporting purposes, for Tax purposes or for legal defense or
prosecution purposes.

                    12.7          Entire
Agreement. This Agreement, the Schedules and the exhibits referred to
herein, and the documents and certificates delivered pursuant hereto and the
Confidentiality Agreement contain (except for Section 7 of the Confidentiality
Agreement, which is hereby modified to omit the words “except in the case of
fraud...”) the entire understanding of the Parties with regard to the subject
matter contained herein or therein, and supersede all other prior agreements,
understandings, term sheets, or letters of intent between or among any of the
Parties.

                    12.8          Interpretation.

                                     (a)          Titles
and headings to articles, sections and subsections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.

                                     (b)          The
Schedules referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein.
Disclosure of any fact or item in any particular Section in this Agreement or
in any Schedule hereto referenced by a particular Section in this Agreement
shall be deemed to have been disclosed with respect to every other Section in
this Agreement to which such matter is reasonably apparent on its face. Neither
the specification of any dollar amount in any representation or warranty
contained in this Agreement nor the inclusion of any specific item in any
Schedule hereto is intended to vary the definition of “Material Adverse Effect”
or to imply that such amount, or higher or lower amounts, or the item so
included or other items, are or are not material, and no party shall use the
fact of the setting forth of any such amount or the inclusion of any such item
in any dispute or controversy between the parties as to whether any obligation,
item or matter not described herein or included in any Schedule is or is not
material for purposes of this Agreement. Unless this Agreement specifically
provides otherwise, neither the specification of any item or matter in any
representation or warranty contained in this Agreement nor the inclusion of any
specific item in any Schedule hereto is intended to imply that such item or
matter, or other items or matters, are or are not in the ordinary course of
business, and no party shall use the fact of the setting forth or the inclusion
of any such item or matter in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in
any Schedule is or is not in the ordinary course of business for purposes of
this Agreement.

                                     (c)          The
Company and the Seller shall, from time to time prior to or at the Closing, by
notice to Buyer, supplement, amend or create any Schedule, in order to add
information or correct previously supplied information. No such supplement, amendment
or addition shall be evidence, in and of itself, that the representations and
warranties in the corresponding Section are no longer true and correct in all
material respects. It is specifically agreed that such Schedules may be
supplemented, amended and/or added to, to add immaterial, as well as material,
items thereto. No such 

49

supplemental,
amended or additional Schedule shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein or shall in any way
limit Buyer’s right to seek indemnity under Article 10.

                                     (d)          Whenever
the context requires in this Agreement, the masculine pronoun shall include the
feminine and the neuter, and the singular shall include the plural, and vice
versa.

                                     (e)          Whenever
the words “include”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation,” whether or
not they are in fact following by those words or words of like import.

                                     (f)          This
Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing
any instrument to be drafted.

                    12.9          Amendments
and Waivers. Any term or provision of this Agreement may be amended or
waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. Any such amendment or waiver,
including any such amendment to or waiver of this Section 12.9, shall be
validly and sufficiently authorized for the purposes of this Agreement if, as
to any party, it is authorized in writing by an authorized representative of
such Party. The failure of any Party to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the
right of any Party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.

                    12.10          Expenses.
Except as otherwise provided herein, each Party will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel, accountants, advisors and consultants.

                    12.11          Partial
Invalidity. Wherever possible, each provision hereof shall be interpreted
in such a manner as to be effective and valid under applicable Law. In case any
one or more of the provisions contained herein shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such provision or
provisions shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, without invalidating the remainder
of such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

                    12.12          Execution
in Counterparts; Facsimile. This Agreement may be executed and delivered in
counterpart signature pages executed and delivered via facsimile transmission,
and any such counterpart executed and delivered via facsimile transmission will
be deemed an original for all intents and purposes. Any shareholder of the
Company who is not a Seller on the date hereof, may become a Seller hereunder
by the execution and delivery of a signature page hereto. Upon such execution
and delivery such shareholder shall be a Seller hereunder and shall be subject
to the obligations of a Seller hereunder.

50

                    12.13          Governing
Law. This Agreement and any disputes hereunder shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of
the State of New York or any other jurisdiction) that would cause the application
of Laws of any jurisdiction other than those of the State of New York.

                    12.14          Consent
to Jurisdiction; Waiver of Jury Trial. 

                    (a)              Each
Party hereby irrevocably and unconditionally submits, for itself and its
property, to the exclusive jurisdiction of the United States District Court for
the Southern District of New York or any court of the State of New York located
in the Borough of Manhattan in the City of New York in any such action, suit or
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated hereby, and agrees that any such action, suit or
proceeding shall be brought only in such court; provided, however,
that such consent to jurisdiction is solely for the purpose referred to in this
Section 12.14 and shall not be deemed to be a general submission to the
jurisdiction of said courts or in the State of New York other than for such
purpose. Each Party hereby irrevocably waives, to the fullest extent permitted
by Law, any objection that it may now or hereafter have to the laying of the
venue of any such action, suit or proceeding brought in such a court and any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum. 

                    (b)              Each
Party acknowledges and agrees that any controversy which may arise under this
agreement is likely to involve complicated and difficult issues, and therefore
it hereby irrevocably and unconditionally waives any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of or relating to this Agreement or the transactions contemplated hereby. 

                    12.15          Disclaimer
of Warranties. The Company and the Sellers make no representations or
warranties with respect to any projections, forecasts or forward-looking
information provided to Buyer. There is no assurance that any projected or
forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS EXPRESSLY
COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT AND THE
OFFICER’S CERTIFICATE REFERRED TO IN SECTION 8.1 HEREOF, THE COMPANY AND
THE SELLERS DISCLAIM ALL OTHER WARRANTIES, REPRESENTATIONS AND GUARANTIES
WHETHER EXPRESS OR IMPLIED.

                    12.16          Time
of Essence. Time is of the essence for each and every provision of this
Agreement.

                    12.17          References
to U.S. Dollars. All references in this Agreement to amounts of money
expressed in dollars are references to United States dollars, unless otherwise
indicated.

                    12.18          Further
Assurances. Each Party shall execute such documents and other papers and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby.

51

                     12.19          Release.

                                        (a)          Buyer
agrees that, effective as of the Closing, each of the Company and the Company Subsidiary
shall be deemed to have released and discharged each Seller (whether in such
Party’s capacity as a shareholder, director, officer, employee or otherwise)
from any and all claims, demands and causes of action, whether known or
unknown, liquidated or contingent, relating to, arising out of or in any way
connected with the dealings of the Company or the Company Subsidiary and such
Party from the beginning of time through the Closing, it being understood,
however, that such release shall not operate to release such Party from any
indemnity obligations, if any, under this Agreement, including without
limitation, under Article 10. Buyer acknowledges that the Laws of many
states provide substantially the following: “A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” Buyer acknowledges that such
provisions are designed to protect a party from waiving claims which it does
not know exist or may exist. Nonetheless, Buyer agrees that, effective as of
the Closing, the Company and Buyer shall be deemed to waive any such provision.
Buyer further agrees that neither Buyer nor the Company, nor any Affiliate of
either, shall (i) institute a lawsuit or other legal proceeding based
upon, arising out of, or relating to any of the released claims,
(ii) participate, assist, or cooperate in any such proceeding, or
(iii) encourage, assist and/or solicit any third party to institute any
such proceeding.

                                       (b)          Each
Seller agrees that, effective as of the Closing, each Seller shall be deemed to
have released and discharged each of the Company and the Company Subsidiary
(whether in such Party’s capacity as a shareholder, director, officer, employee
or otherwise) from any and all claims, demands and causes of action, whether
known or unknown, liquidated or contingent, relating to, arising out of or in
any way connected with the dealings of the Company or the Company Subsidiary
and such Party from the beginning of time through the Closing, it being
understood, however, that such release shall not operate to release such Party
from any indemnity obligations, if any, under this Agreement, including without
limitation, under Article 10 and claims for salary and benefits payable in
the ordinary course of business by the Company to any Seller who is an employee
of the Company. Each Seller acknowledges that the Laws of many states provide
substantially the following: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.” Each Seller acknowledges that such provisions are
designed to protect a party from waiving claims which it does not know exist or
may exist. Nonetheless, each Seller agrees that, effective as of the Closing,
each Seller shall be deemed to waive any such provision. Each Seller further
agrees that it shall not (i) institute a lawsuit or other legal proceeding
based upon, arising out of, or relating to any of the released claims,
(ii) participate, assist, or cooperate in any such proceeding, or
(iii) encourage, assist and/or solicit any third party to institute any
such proceeding.

52

                    12.20          No
Rescission. No Party shall be entitled to rescind the transactions
contemplated hereby by virtue of any failure of any Party’s representations and
warranties herein to have been true or any failure by any Party to perform its
obligations hereunder.

                    12.21          Conflict
of Interest. If the Sellers or the Shareholders’ Representative so desire,
and without the need for any consent or waiver by the Company, the Company
Subsidiary or Buyer, Wiggin and Dana shall be permitted to represent the
Sellers and/or the Shareholders’ Representative after the Closing in connection
with any matter, including without limitation anything related to the
transactions contemplated by this Agreement or any disagreement or dispute
relating thereto. Without limiting the generality of the foregoing, after the
Closing, Wiggin and Dana shall be permitted to represent the Sellers, the
Shareholders’ Representative, any of their agents and affiliates, or any one or
more of them, in connection with any negotiation, transaction or dispute
(“dispute” includes litigation, arbitration or other adversary proceeding) with
Buyer, the Company, the Company Subsidiary or any of their agents or affiliates
under or relating to this Agreement, any transaction contemplated by this
Agreement, and any related matter, such as claims for indemnification and
disputes involving employment or noncompetition or other agreements entered
into in connection with this Agreement. Upon and after the Closing, each of the
Company and the Company Subsidiary shall cease to have any attorney-client
relationship with Wiggin and Dana, unless Wiggin and Dana is specifically
engaged in writing by the Company or the Company Subsidiary to represent such
entity after Closing and either such engagement involves no conflict of
interest with respect to Sellers or the Shareholders’ Representative or the
Sellers or the Shareholders’ Representative (as applicable) consent in writing
at the time to such engagement. Any such representation of the Company or the
Company Subsidiary by Wiggin and Dana after Closing shall not affect the
foregoing provisions hereof. For example, and not by way of limitation, even if
Wiggin and Dana is representing the Company or the Company Subsidiary after the
Closing, Wiggin and Dana shall be permitted simultaneously to represent the
Sellers and/or the Shareholders’ Representative in any matter, including any
disagreement or dispute relating thereto. Furthermore, Wiggin and Dana shall be
permitted to withdraw from any representation of the Company or the Company
Subsidiary in order to be able to represent or continue so representing the
Sellers or the Shareholders’ Representative, even if such withdrawal causes the
Company, the Company Subsidiary or Buyer additional legal expense, delay or
other prejudice.

ARTICLE 13

DEFINITIONS 

                    13.1          Definitions.
In this Agreement, the following terms have the meanings specified in this
Section 13.1.

                    “Acquisition
Proposal”
means any proposal for a merger or other business combination to which a
Seller, the Company or the Company Subsidiary is a party or the direct or
indirect acquisition of any equity interest in, or a substantial portion of the
assets of, the Company or the Company Subsidiary, other than the transactions
contemplated by this Agreement.

                    “Action”
means any
lawsuit, legal proceeding, litigation, arbitration or Governmental Authority
investigations or audit.

                    “Affiliate”
means,
with respect to any Person, any other Person, which directly or indirectly
controls, is controlled by or is under common control with such Person. For purposes
of this 

53

definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise and, in any event and without limitation of the previous sentence,
any Person owning ten percent (10%) or more of the voting securities of
another Person shall be deemed to control that Person. 

                    “AOCs”
means the North Haven AOCs and the Gardner AOCs.

                    “Base
Amount” means
Forty-One Million Seven Hundred Thousand Dollars ($41,700,000), minus
(i) the amount, if any, by which Closing Cash is less than Four Hundred
Seventy-Five Thousand Dollars ($475,000), (ii) the Management Amount,
(iii) the Expense Amount (iv) the Estimated Retirement Underfunding Amount
and (v) the December Dividend Amount. 

                    “Benefit
Plan” means
each written compensation or benefits plan, program or arrangement (including,
without limitation, plans within the meaning of Section 3(3) of ERISA
(regardless of whether such plan is subject to ERISA), employment agreements,
profit-sharing, defined contribution, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, change of control,
termination, welfare or fringe benefit plans, programs, agreements or
arrangements, cash or equity-based bonus or incentive arrangements, severance
arrangements and vacation policies) contributed to or sponsored or maintained
by the Company, any ERISA Affiliate or Company Subsidiary for the benefit of
any current or former employees.

                    “Business
Day” means a
day other than Saturday, Sunday or any day on which banks located in the State
of Connecticut are authorized or obligated to close.

                    “Closing
Cash” means,
as of the close of business on the Business Day immediately proceeding the
Closing Date, the aggregate cash balance of the Company and the Company
Subsidiary as of such time (whether positive or negative), including all cash,
commercial paper, certificates of deposit and other bank deposits, treasury
bills, and all other cash equivalents in all accounts of each of the Company
and the Company Subsidiary, and third Person checks deposited or held in any
Company or Company Subsidiary accounts that have not yet cleared; provided
that Closing Cash shall be reduced by (a) to the extent included as “cash”
in the aggregate cash balance, security and similar deposits and amounts held
in escrow at such time to secure the performance of trade contracts, leases,
letters of credit or similar obligations and (b) the amount of all
outstanding checks on draft of the Company or the Company Subsidiary issued or
outstanding at such time. 

                    “Code”
means the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.

                    “Company
Subsidiary”
means H&R 1871, LLC, a Connecticut limited liability company.

                    “Contract”
means any
contract, agreement, license, lease, guaranty, indenture, sales or purchase
order or other legally binding commitment in the nature of a contract (whether
written or oral).

                    “Copyrights”
means all
registered U.S. and foreign works of authorship and all applications to
register and renewals of any of the foregoing.

54

                    “Court
Order” means
any judgment, order, writ, decision, injunction, award or decree of any
foreign, federal, state, local or other court or tribunal, or of any
Governmental Authority and any ruling or award in any binding arbitration
proceeding in each case, whether preliminary or final.

                    “December
Dividend”
means the cash dividend declared by the Board of Directors of the Company on
December 19, 2007 to be paid prior to the Closing Date.

                    “December
Dividend Amount”
means the aggregate amount of up to $254,313, constituting the December
Dividend.

                    “Deferred
Compensation Plan”
means a Benefit Plan that is an agreement that the Company has entered into with
any current or former employee that is characterized by the Company as a
deferred compensation agreement and any amendment thereto.

                    “Defined
Benefit Plan”
means each Benefit Plan which is subject to Part 3 of Title I of ERISA,
Section 412 of the Code or Title IV of ERISA.

                    “Employment
and Withholding Taxes”
means any federal, state, provincial, local, foreign or other employment,
unemployment insurance, social security, disability, workers’ compensation,
payroll, health care or other similar tax, duty or other governmental charge or
assessment or deficiencies thereof and all Taxes required to be withheld by or
on behalf of each of the Company and the Company Subsidiary in connection with
amounts paid or owing to any employee, independent contractor, creditor or
other party, in each case, on or in respect of the business or assets thereof.
Any Employment and Withholding Tax is also included in the definition of Tax
wherever the term Tax is used.

                    “Encumbrance”
means
any lien, encumbrance, claim, charge, security interest, mortgage, deed of
trust, pledge, easement, defect in title or other restriction of a similar
kind, conditional sale contract or other title retention Contract or other
Contract to give any of the foregoing, other than Permitted Encumbrances.

                    “Environmental
Laws”
means all federal, state, local or foreign laws, statutes, ordinances,
regulations, rules, judgments, orders, notice requirements, court decisions,
agency guidelines or principles of law, restrictions and licenses, which
(a) regulate or relate to the protection or clean-up of the environment;
the use, treatment, storage, transportation, handling, disposal or release of
Hazardous Substances or the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural resources;
or (b) impose liability with respect to any of the foregoing.

                    “ERISA”
means the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

                    “ERISA
Affiliate”
means any Person who, together with the Company or the Company Subsidiary, is
treated as a single employer under Section 414 of the Code. 

                    “Escrow
Agent” means
an institutional escrow agent mutually agreed to by the Parties.

55

                    “Estimated
Retirement Underfunding
Amount” means $2,811,000 plus any payments made to partially fund any
underfunding under Pension Plans from the date hereof until the Closing Date.

                    “Exchange
Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

                    “Extended
Coverage Policy”
means a three (3)-year run-off directors and officers liability policy, for the
benefit of the Persons who served as directors and officers of each of the
Company and the Company Subsidiary prior to the Closing, providing coverage at
least equivalent to the Company’s existing levels of coverage and otherwise in
a form approved by the Shareholders’ Representative, which approval shall not
be unreasonably withheld.

                    “GAAP”
means United
States generally accepted accounting principles as in effect from time to time,
consistently applied throughout the specific period and in the immediately
prior comparable period.

                    “Gardner
AOCs” means
those areas of concern identified at the Gardner Facility, as set forth on
Table 2 to Schedule 4.16(c) to the Agreement.

                    “Governmental
Authority”
means any foreign, domestic, federal, territorial, state or local governmental
authority, quasi-governmental authority, court, commission, board, bureau,
agency or instrumentality, or any regulatory, administrative or other
department, agency, or any political or other subdivision, department or branch
of any of the foregoing.

                    “Hazardous
Substances”
shall mean any quantity of asbestos in any form, urea formaldehyde, PCBs, radon
gas, crude oil or any fraction thereof, all forms of natural gas, petroleum
products or by-products, any radioactive substance, any toxic, infectious,
reactive, corrosive, ignitable or flammable chemical or chemical compound and
any other hazardous substance, material or waste (as defined in, or for
purposes of, any Environmental Law), whether solid, liquid or gas.

                    “Indebtedness”
means
the amount due and owing by the Company and the Company Subsidiary under the
line of credit pursuant to the Webster Credit Agreement.

                    “Intellectual
Property”
means all intellectual property rights of any nature or form of protection or
similar nature or having equivalent or similar effect to any of the foregoing,
including, without limitation, Patents, Marks and Copyrights.

                    “Knowledge
of the Company,”
or any variant thereof, means as to a particular matter, the actual knowledge
of the following persons: Robert W. Behn, Robert Belcourt, Jr., Robert Bourke,
Wendy Duby, Pamela Griffin, Christopher Heyl, Michael Jensen, Frank Kenna, III,
Timothy Looney and Kevin O’Brien, including, without limitation, any knowledge
obtained in connection with the preparation and negotiation of this Agreement. 

                    “Law”
means any law,
statute, rule, regulation, ordinance, order, decree, consent decree or similar
instrument or determination or award of a court or any other Governmental
Authority.

56

                    “Losses”
means any and
all losses, claims, damages, liabilities, expenses (including reasonable
attorneys’ and accountants’ fees), assessments and Taxes.

                    “Management
Amount”
means the aggregate amount payable pursuant to the Company’s Executive
Incentive and Company Acquisition Policies to the individuals listed in
Sections 1 through 3 of Schedule 4.15(i).

                    “Marks”
means all
registered and unregistered U.S. and foreign trade names, trademarks, trade
dress and service marks, together with any applications related thereto.

                    “Material
Adverse Effect”
means any change, circumstance or effect that has a material adverse effect on
the assets, properties, liabilities, business, prospects or financial condition
or results of operations of the Company and the Company Subsidiary as a whole; provided,
however,
that Material Adverse Effect shall exclude any adverse changes or conditions as
and to the extent such changes or conditions relate to or result from
(i) general business, economic, political, regulatory conditions,
including such conditions generally affecting the industry in which the Company
or the Company Subsidiary competes, (ii) national or international
political or social conditions, including the engagement by the United States
in hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon
the United States, or any of its territories, possessions, or diplomatic or
consular offices or upon any military installation, equipment or personnel of
the United States, (iii) changes in Law or GAAP, (iv) the taking of
any action required by this Agreement, or (v) the taking of any action by
the Company with the prior consent of Buyer; provided, further,
that in the case of clauses (i)-(iii), only to the extent such changes and
conditions have had a disproportionate effect on the Company and the Company
Subsidiary taken as a whole, as compared to other participants in the industry
in which the Company and the Company Subsidiary operate. 

                    “Neutral
Actuary”
means an independent actuary of nationally recognized standing that is not at
the time it is being engaged hereunder rendering services to any Party and has
not done so within the two year period prior thereto.

                    “North
Haven AOCs”
means those areas of concern identified at the North Haven Facility, as set
forth on Table 1 to Schedule 4.16(c) to the Agreement.

                    “Owned
Real Property”
means all land, together with all buildings, structures, improvements, and
fixtures located thereon, and all easements and other rights and interests
appurtenant thereto, owned by the Company or the Company Subsidiary.

                    “Patents”
means all
issued U.S. and foreign patents and pending patent applications.

                    “Pension
Plan” means
any Benefit Plan that is a pension benefit plan within the meaning of Section
3(2) of ERISA.

                    “Permits”
means all
licenses, permits, franchises, approvals, authorizations, consents or orders
of, or filings with, any Governmental Authority or any other Person.

                    “Permitted
Encumbrances”
means (a) liens for Taxes and other governmental charges and assessments
which are not yet due and payable or which are being contested in good faith by

57

appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, (b) any statutory liens arising in the ordinary course of
business by operation of Law, (c) other minor imperfections of title, or
similar Encumbrance, which individually or in the aggregate with other such
Encumbrances do not materially impair the value of the property subject to such
Encumbrance or the use of such property in the conduct of the business of the
Company or the Company Subsidiary, (d) liens specifically identified in
the Financial Statements and (e) the Encumbrances set forth on Schedule 13.1.

                    “Person”
means an
individual, partnership, corporation, limited liability company, joint stock
company, trust, association, joint venture, Governmental Authority or other
entity of whatever nature.

                    “Qualified
Plan” means
each Benefit Plan which is intended to qualify under Section 401 of the
Code.

                    “Retirement
Underfunding”
means the amount by which the Company’s liabilities with respect to any Pension
Plans, if any, exceed assets associated with such Pension Plans, calculating
such liabilities and assets as of the Closing Date as set forth in Article 2. 

                    “Schedules”
means the
record delivered to Buyer by the Company and the Sellers or the Company and the
Sellers to Buyer, as applicable, herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as are
required to be included therein by the Company and the Sellers or Buyer, as
applicable, pursuant to this Agreement.

                    “SERP”
means any
Benefit Plan that is an agreement that the Company has entered into with any
current or former employee that is characterized by the Company as a
supplemental retirement plan and any amendment thereto.

                    “Straddle
Period”
means any Tax period that begins before the Closing Date and ends after the
Closing Date.

                    “Tax”
(and, with
correlative meaning, “Taxes”) means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, or addition thereto imposed by any Governmental Authority, whether
disputed or not, and any expenses incurred in connection with the
determination, settlement or litigation of any Tax liability.

                    “Tax
Return” means any
return, report or similar statement required to be filed with respect to any
Tax (including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of
estimated Tax and any affiliated, consolidated, combined, unitary or similar return.

                    “Total
Consideration”
means the Base Amount plus the amount, if any, payable to the Sellers
pursuant to Section 2.3.

58

                    “Trust
Amount” means
Two Million Dollars ($2,000,000) to be disbursed to an account designated by
the Shareholders’ Representative.

                    13.2          Index
of Defined Terms. Solely for convenience purposes, the following is a list
of terms that are defined in this Agreement and the Section number where such
definition is contained:

	
 

	
 

	
 

	
 

	
TERM: 

	
SECTION: 

	
 

	

	

	
 

	
 

	
 

	
 

	
Actuarial
  Arbitrator

	
Section 2.2(b)

	
 

	
Acquisition
  Financing

	
Section 6.7

	
 

	
Agreement

	
Preface

	
 

	
Audited
  Financial Statements 

	
Section 4.5(a)

	
 

	
Business
  Agreements

	
Section 4.14

	
 

	
Business
  Employees

	
Section 7.1(a)

	
 

	
Buyer

	
Preface

	
 

	
Buyer’s
  Breach Notice

	
Section 11.1(a)(iv)

	
 

	
Claim Notice

	
Section 10.4(a)

	
 

	
Class A
  Common Stock

	
Section
  4.4(a)

	
 

	
Class B
  Common Stock

	
Section
  4.4(a)

	
 

	
Closing

	
Section
  1.2(a)

	
 

	
Closing Date

	
Section 1.2(a)

	
 

	
Closing
  Retirement Underfunding

	
Section 2.1

	
 

	
Closing
  Retirement Underfunding Statement

	
Section 2.1

	
 

	
Company

	
Preface

	
 

	
Company
  Agent

	
Section
  7.2(a)

	
 

	
Company
  Intellectual Property

	
Section 4.11(b)

	
 

	
Confidentiality
  Agreement

	
Section 6.4(a)

	
 

	
Controlling
  Party

	
Section 10.5(b)

	
 

	
Escrow
  Agreement

	
Section 1.2(c)

	
 

	
Escrow
  Amount

	
Section 1.2(c)

	
 

	
Expense
  Amount

	
Section 1.2(e)

	
 

	
Expense
  Statement

	
Section 1.2(e)

	
 

	
Financial
  Statements

	
Section 4.5(a)

	
 

	
Firearms
  Regulations

	
Section 4.12

	
 

	
Indemnified
  Party

	
Section 10.4(a)

	
 

	
Indemnitor

	
Section 10.4(a)

	
 

	
Information

	
Section
  6.4(b)

	
 

	
IRS

	
Section
  4.8(k)

	
 

	
Leases

	
Section
  4.10(b)

	
 

	
Leased Real
  Property

	
Section
  4.10(b)

	
 

	
Most Recent
  Audited Balance Sheet Date

	
Section 4.5(a)

	
 

	
Most Recent
  Financial Statements

	
Section 4.5(a)

	
 

	
New Haven
  Property

	
Section
  4.16(e)

	
 

	
Non-Competition
  Agreement

	
Section 8.10

59

	
 

	
 

	
 

	
 

	
TERM: 

	
SECTION: 

	
 

	

	

	
 

	
 

	
 

	
 

	
North Haven
  AOCs

	
Section 7.6

	
 

	
North Haven
  Property

	
Section
  4.16(e)

	
 

	
Parties

	
Preface

	
 

	
Pre-Closing
  Straddle Period

	
Section
  7.3(c)

	
 

	
Prior Period
  Returns

	
Section 7.3(b)

	
 

	
Representatives
  

	
Section
  6.4(b)

	
 

	
Required
  Consents

	
Section 8.3

	
 

	
Securities
  Act

	
Section 5.8

	
 

	
Seller(s)

	
Preface

	
 

	
Share(s)

	
Recitals

	
 

	
Shareholders’
  Representative

	
Section 12.1(a)

	
 

	
The Marlin
  Company

	
Section 7.4

	
 

	
Threshold
  Amount

	
Section 10.1(a)(i)

	
 

	
TMC Lease

	
Section 4.10(a)(ii)

	
 

	
Trademark
  Coexistence Agreement

	
Section 8.5

	
 

	
Transfer Act

	
Section
  4.16(h)

	
 

	
Vintage
  Firearms

	
Section 6.13

	
 

	
Waiver and
  Termination Agreement

	
Section 4.30

	
 

	
Webster

	
Section 4.3(c)

	
 

	
Webster
  Credit Agreement

	
Section
  4.3(c)

	
 

	
Wiggin and
  Dana

	
Section 1.2(a)

	
 

	
 

	
 

60

                    IN
WITNESS WHEREOF, the Parties have executed or caused this Agreement to be
executed and delivered as of the day and year first above written.

	
 

	
 

	
 

	
 

	
“Company”

	
 

	
 

	
 

	
THE MARLIN
  FIREARMS COMPANY

	
 

	
 

	
 

	
 

	
By:

	
/s/ Frank
  Kenna, III

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name: Frank
  Kenna, III

	
 

	
 

	
Title:
  Chairman of the Board

	
 

	
 

	
 

	
“Buyer”

	
 

	
 

	
 

	
REMINGTON
  ARMS COMPANY, INC.

	
 

	
 

	
 

	
 

	
By:

	
/s/ Stephen
  P. Jackson, Jr.

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name:
  Stephen P. Jackson, Jr.

	
 

	
 

	
Title: Chief
  Financial Officer,

  Treasurer and Corporate Secretary

	
 

	
 

	
 

	
“Shareholders’ Representative”

	
 

	
 

	
 

	
/s/ Frank
  Kenna, III

	
 

	
 

	
 

	

	
 

	
Frank Kenna,
  III

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Ward J. Doonan 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Ward J.
  Doonan, 

	
 

	
 

	
Custodian
  for Cecily J. Doonan

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Ward J.
  Doonan

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Ward J.
  Doonan

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Ward J.
  Doonan

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Ward J.
  Doonan, 

	
 

	
 

	
Custodian
  for Brett E. Doonan

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Ward J.
  Doonan

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Ward J.
  Doonan, Trustee 

	
 

	
 

	
Doonan
  Family Trust

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
/s/ Ward J.
  Doonan

	
 

	
/s/ Cynthia
  Doonan

	
 

	
 

	
 

	

	
 

	

	
Ward J.
  Doonan, Co-Trustee

	
 

	
Cynthia
  Doonan, Co-Trustee

	
W. Doonan Trust
  u/w Edward Doonan

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Melva Jean
  Foster

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Jeff Herr

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Cynthia
  Kenna Mullins

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Cynthia
  Kenna Mullins

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Frank
  Kenna, Jr.

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Frank Kenna,
  Jr.

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Gilbert
  Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Gilbert
  Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Frank
  Kenna, III

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Frank Kenna,
  III

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Herman
  Robert Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Herman
  Robert Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Joan G.
  Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Joan G.
  Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
/s/ Joanna
  N. Kenna

	
 

	
/s/ Alex
  Kenna

	
 

	
 

	
 

	

	
 

	

	
Joanna N.
  Kenna, Co-Executor

	
 

	
Alex Kenna,
  Co-Executor

	
Estate of J.
  Stephen Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Caleb
  Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Caleb Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Margaret Alene Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Margaret Alene Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Christine Kenna Moore

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Christine
  Kenna Moore

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Matthew Gilbert Kenna

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Matthew
  Gilbert Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Nicholas
  Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Greg Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/
  Greenberg & Company

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Greenberg
  & Company,Trustee for

	
 

	
 

	
Theodore Lynch Sub S Trust

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Theodore
  B. Lynch

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Theodore B. Lynch

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Roger Kenna, III

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	
/s/ Betsy L. Strom

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Betsy L.
  Strom

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
/s/ Betsy L.
  Strom

	
 

	
/s/ Ernest
  D. Strom 

	
 

	
 

	
 

	

	
 

	

	
Betsy L.
  Strom, Co-Trustee

	
 

	
Ernest D.
  Strom, Co-Trustee

	
u/t/o Betsy L.
  Strom

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
EGAP Co.,
  Trustee

	
 

	
 

	
Kenna Marital Trust f/b/o Constance Kenna

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
EGAP Co.,
  Trustee

	
 

	
 

	
Kenna Nonmarital Trust f/b/o et al.

	
 

	
 

	
 

	
 

	
 

	
“Sellers”

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Herbert
  Weaver, Jr.

List of Omitted Schedules and Exhibits

to that certain

Stock Purchase Agreement, dated as of December 21, 2007,

by and among

The Marlin Firearms Company, Remington Arms Company, Inc., the
Shareholders of The Marlin Firearms Company listed on the signature pages
thereto, and Frank Kenna, III, solely in his capacity as the Shareholders
Representative
______________________________________________________________________________

Pursuant to Item 601(b)(2) of Regulation S-K, Remington Arms Company,
Inc. hereby agrees to furnish supplementally a copy of any omitted schedule,
annex, appendix or exhibit identified below to the Securities and Exchange
Commission upon request.

OMITTED SCHEDULES

	
      Schedule 1.1:
	
      Sellers

	
      Schedule 3.4:
	
      Business Involvement 

	
      Schedule 4.1:
	
      Organization and Power

	
      Schedule 4.5(b):
	
      Financial Statements

	
      Schedule 4.6:
	
      No Undisclosed Liabilities

	
      Schedule 4.7:
	
      Operations Since the Most Recent Audited Balance Sheet Date
      (including Appendices)

	
      Schedule 4.8(c):
	
      Audits and Extensions; etc.

	
      Schedule 4.8(e):
	
      Other Jurisdictions

	
      Schedule 4.8(k):
	
      Accounting Method, etc.

	
      Schedule 4.8(p):
	
      Escheat and Unclaimed Property

	
      Schedule 4.9:
	
      Permits (including Appendices)

	
      Schedule 4.10(a):
	
      Owned Real Property

	
      Schedule 4.10(b):
	
      Leased Real Property

	
      Schedule 4.10(d):
	
      Condition of Improvements

	
      Schedule 4.11(b):
	
      Intellectual Property

	
      Schedule 4.12:
	
      Compliance with Laws

	
      Schedule 4.13:
	
      Contracts (including Appendix)

	
      Schedule 4.15(a):
	
      Employee Benefit Plans

	
      Schedule 4.15(c):
	
      Deferred Compensation

	
      Schedule 4.15(g):
	
      Pension Plan Transactions

	
      Schedule 4.15(h):
	
      Defined Benefit Plans

	
      Schedule 4.15(i):
	
      Transaction Payments

	
      Schedule 4.15(j):
	
      Post-Employment Welfare Coverage

	
      Schedule 4.16(a):
	
      Compliance with Environmental Laws

	
      Schedule 4.16(c):
	
      Release of Hazardous Substances (including Tables)

	
      Schedule 4.16(d):
	
      Handling of Hazardous
Substances

 

 

 

 

	
      Schedule 4.16(e):
	
      Environmental Notices

	
      Schedule 4.16(g):
	
      Environmental Notices

	
      Schedule 4.17(a):
	
      Employee Relations and Agreements

	
      Schedule 4.18:
	
      Litigation

	
      Schedule 4.18(d):
	
      The Settled Cases

	
      Schedule 4.19:
	
      Insurance

	
      Schedule 4.20(a):
	
      Customers

	
      Schedule 4.20(b):
	
      Suppliers

	
      Schedule 4.21:
	
      Accounts Receivable 

	
      Schedule 4.22:
	
      Properties

	
      Schedule 4.23:
	
      Bank Accounts 

	
      Schedule 4.24:
	
      Powers of Attorney; Guarantees

	
      Schedule 4.25:
	
      Transactions with Affiliates 

	
      Schedule 4.29:
	
      Product Liabilities and Product Warranties (including
      Appendices)

	
      Schedule 5.3:
	
      Governmental Authority

	
      Schedule 6.2:
	
      Operations Prior to the Closing Date

	
      Schedule 6.13:
	
      Distributions

	
      Schedule 7.4:
	
      Management Amount

	
      Schedule 8.3:
	
      Required Consents

	
      Schedule 13.1:
	
      Permitted Encumbrances

 

 

OMITTED ANNEX AND EXHIBITS

 

	
      Annex A:
	
      Retirement Underfunding Methods and
  Assumptions

	
      Exhibit A:
	
      Escrow Agreement

	
      Exhibit B: 
	
      Waiver and Termination
Agreement

	
      Exhibit C:
	
      Trademark Coexistence
Agreement

	
      Exhibit D:
	
      Non-Competition
Agreement

 

 

2exhibit4_1.htm

    
      

      

      Exhibit
        4.1

      

       

      

       

      

       

      CREDIT
        AGREEMENT

       

      

       

      by
        and among

       

      

       

      STORM
        CAT ENERGY (USA) CORPORATION

       

      as
        Borrower,

       

      THE
        LENDERS THAT ARE SIGNATORIES HERETO

       

      as
        the Lenders,

       

      and

       

      WELLS
        FARGO FOOTHILL, LLC

       

      as
        Agent

       

      

       

      Dated
        as of December 27, 2007

       

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      CREDIT
        AGREEMENT

       

      THIS
        CREDIT AGREEMENT (this “Agreement”), is entered into as of
        December 27, 2007, by and among the lenders identified on the signature
        pages hereof (such lenders, together with their respective successors and
        permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), WELLS FARGO FOOTHILL, LLC,
        a Delaware limited liability company, as administrative agent for the Lenders
        (in such capacity, together with its successors and assigns in such capacity,
        “Agent”), and STORM CAT ENERGY (USA) CORPORATION, a Colorado corporation
        (“Borrower”).

       

      The
        parties agree as follows:

       

      1.  DEFINITIONS
        AND CONSTRUCTION

       

      1.1  Definitions. Capitalized
        terms used in this Agreement shall have the meanings specified therefor on
        Schedule 1.1.

       

      1.2  Accounting
        Terms.  All
        accounting terms not specifically defined herein shall be construed in
        accordance with GAAP.  When used herein, the term “financial
        statements” shall include the notes and schedules thereto.  Whenever
        the term “Borrower” is used in respect of a financial covenant or a related
        definition, it shall be understood to mean Borrower and its Subsidiaries
        on a
        consolidated basis, unless the context clearly requires otherwise.

       

      1.3  Code.  Any
        terms used in this Agreement that are defined in the Code shall be construed
        and
        defined as set forth in the Code unless otherwise defined herein; provided,
        however, that to the extent that the Code is used to define any term herein
        and
        such term is defined differently in different Articles of the Code, the
        definition of such term contained in Article 9 of the Code shall
        govern.

       

      1.4  Construction.  Unless
        the context of this Agreement or any other Loan Document clearly requires
        otherwise, references to the plural include the singular, references to the
        singular include the plural, the terms “includes” and  “including” are
        not limiting, and the term “or” has, except where otherwise indicated, the
        inclusive meaning represented by the phrase “and/or.”  The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
        or any other Loan Document refer to this Agreement or such other Loan Document,
        as the case may be, as a whole and not to any particular provision of this
        Agreement or such other Loan Document, as the case may be.  Section,
        subsection, clause, schedule, and exhibit references herein are to this
        Agreement unless otherwise specified.  Any reference in this Agreement
        or in any other Loan Document to any agreement, instrument, or document shall
        include all alterations, amendments, changes, extensions, modifications,
        renewals, replacements, substitutions, joinders, and supplements, thereto
        and
        thereof, as applicable (subject to any restrictions on such alterations,
        amendments, changes, extensions, modifications, renewals, replacements,
        substitutions, joinders, and supplements set forth herein).  Any
        reference herein or in any other Loan Document to the satisfaction or repayment
        in full of the Obligations shall mean the repayment in full in cash (or,
        in the
        case of Letters of Credit or Bank Products, the cash collateralization or
        support by a standby letter of credit in accordance with the terms hereof)
        of
        all Obligations other than unasserted contingent indemnification Obligations
        and
        other than any Bank Product Obligations that, at such time, are allowed by
        the
        applicable Bank Product Provider to remain outstanding and that are not required
        by the provisions of this Agreement to be repaid or cash
        collateralized.  Any reference herein to any Person shall be construed
        to include such Person’s successors and assigns.  Any requirement of a
        writing contained herein or in any other Loan Document shall be satisfied
        by the
        transmission of a Record and any Record so transmitted shall constitute a
        representation and warranty as to the accuracy and completeness of the
        information contained therein.

       

      1.5  Schedules
        and Exhibits.  All
        of the schedules and exhibits attached to this Agreement shall be deemed
        incorporated herein by reference.

       

      2.  LOAN
        AND TERMS OF PAYMENT.

       

      2.1  Revolver
        Advances.

       

      (a)  Subject
        to the terms and conditions of this Agreement, and during the term of this
        Agreement, each Lender with a Revolver Commitment agrees (severally, not
        jointly
        or jointly and severally) to make advances (“Advances”) to Borrower in an amount
        at any one time outstanding not to exceed such Lender’s Pro Rata Share of an
        amount equal to the lesser of (i) the Maximum Revolver Amount less
the Letter of Credit Usage at such time less the sum of (x) the
        Bank Product Reserve and (y) the aggregate amount of reserves, if any,
        established by Agent under Section 2.1(b), and (ii) the Borrowing Base at
        such
        time less the Letter of Credit Usage at such time, it being understood
        that, pursuant to Section 2.1(c) below, the initial borrowing amount in respect
        of Revolver Usage shall be Twenty-Five Million Dollars
        ($25,000,000).

       

      (b)  Anything
        to the contrary in this Section 2.1 notwithstanding, Agent shall have the
        right
        to establish reserves against the then-existing Borrowing Base or the Maximum
        Revolver Amount in such amounts, and with respect to such matters, as Agent
        in
        its Permitted Discretion shall determine to be necessary or appropriate,
        including reserves with respect to (i) sums that Borrower or its Subsidiaries
        are required to pay under any Section of this Agreement or any other Loan
        Document (such as taxes, assessments, insurance premiums, or, in the case
        of
        leased assets, rents or other amounts payable under such leases) and has
        failed
        to pay, and (ii) amounts owing by Borrower or its Subsidiaries to any Person
        to
        the extent secured by a Lien on, or trust over, any of the Collateral (including
        proceeds thereof or collections from the sale of Hydrocarbons which may from
        time to time come into the possession of Lenders or their agent(s)) (other
        than
        a Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent
        likely would have a priority superior to Agent’s Liens (such as Liens or trusts
        in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers,
        or suppliers, or Liens or trusts for ad valorem, excise, sales, or
        other taxes where given priority under applicable law) in and to such item
        of
        the Collateral.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (c)  For
        the
        period from and including the Closing Date to but excluding the first
        Redetermination Date, the amount of the Borrowing Base shall be Twenty-Five
        Million Dollars ($25,000,000), subject
        to adjustment
        as provided in Section
        2.1(b).  Notwithstanding the foregoing, the Borrowing Base may
        be subject to further adjustments from time to time pursuant to Section 5.21(d)
        or clause (g) of the definition of “Permitted Dispositions.”

       

      (d)  The
        Borrowing Base shall be redetermined semi-annually in accordance with this
        Section 2.1 (each, a “Scheduled Redetermination”), and subject to
        Section 2.1(e)(iii)(A), such redetermined Borrowing Base shall become
        effective and applicable to Borrower, Agent, the Issuing Lenders and the
        Lenders
        on April 3 and October 3 of each year, commencing April 3, 2008.  In
        addition, Borrower may, by notifying Agent thereof, and Agent may, at the
        direction of the Required Lenders, by notifying Borrower thereof, one time
        during any 12-month period, each elect to cause the Borrowing Base to be
        redetermined between Scheduled Redeterminations (an “Interim Redetermination”)
        in accordance with this Section 2.1.

       

      (e)  

       

      (i)  Each
        Scheduled Redetermination and each Interim Redetermination shall be effectuated
        as follows:  Upon receipt by Agent of (A) the Reserve Report and the
        certificate required to be delivered by Borrower to Agent, in the case of
        a
        Scheduled Redetermination, pursuant to Sections 5.20(a) and (c), and, in
        the case of an Interim Redetermination, pursuant to Sections 5.20(b) and
        (c), and (B) such other reports, data and supplemental information, as may,
        from
        time to time, be reasonably requested by Agent or any Lender (the Reserve
        Report, such certificate and such other reports, data and supplemental
        information being the “Engineering Reports”), Agent shall evaluate the
        information contained in the Engineering Reports and shall, in good faith,
        propose a new Borrowing Base (the “Proposed Borrowing Base”), based upon the
        Reserve Reports and such other information (including, without limitation,
        the
        status of title information with respect to the Oil and Gas Properties as
        described in the Engineering Reports and the existence of any other Indebtedness
        other than the Convertible Subordinated Notes) as Agent deems appropriate
        in its
        Permitted Discretion. In no event shall the Proposed Borrowing Base exceed
        the
        Maximum Revolver Amount.

       

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

       

      (A)  in
        the
        case of a Scheduled Redetermination (a) if Agent shall have received the
        Engineering Reports required to be delivered by Borrower pursuant to Sections
        5.20(a) and (c) in a timely and complete manner, then on or before March
        22 and
        September 22 of such year following the date of delivery or (b) if Agent
        shall
        not have received the Engineering Reports required to be delivered by Borrower
        pursuant to Sections 5.20(a) and (c) in a timely and complete manner, then
        promptly after Agent has received complete Engineering Reports from Borrower
        and
        has had a reasonable opportunity to determine the Proposed Borrowing Base
        in
        accordance with Section 2.1(e)(i); provided, that if such Engineering
        Reports are not delivered as required pursuant to Sections 5.20(a) and (c),
        until the next Scheduled Redetermination, Agent shall determine the Borrowing
        Base in its sole discretion, subject to the provisions of Section 2.1(e)(iii);
        and

       

      (B)  in
        the
        case of an Interim Redetermination, promptly, and in any event, within thirty
        (30) days after Agent has received the required Engineering Reports from
        Borrower.

       

      (iii)  Any
        Proposed Borrowing Base that would increase the Borrowing Base then in effect
        must be approved or deemed to have been approved by all of the Lenders as
        provided in this Section 2.1(e)(iii) and any Proposed Borrowing Base that
        would maintain or decrease the Borrowing Base then in then in effect must
        be
        approved or deemed to have been approved by the Required Lenders as provided
        in
        this Section 2.1(e)(iii).  Upon receipt of the Proposed Borrowing
        Base Notice, each Lender shall have ten (10) days to agree with the Proposed
        Borrowing Base or disagree with the Proposed Borrowing Base by proposing
        an
        alternate Borrowing Base.  If at the end of such ten (10) days, any
        Lender has not communicated its approval or disapproval in writing to Agent,
        such silence shall be deemed to be an approval of the Proposed Borrowing
        Base.  If, at the end of such ten (10)-day period, all of the Lenders,
        in the case of a Proposed Borrowing Base that would increase the Borrowing
        Base
        then in effect, or the Required Lenders, in the case of a Proposed Borrowing
        Base that would decrease or maintain the Borrowing Base then in effect, have
        approved or deemed to have approved, as aforesaid, then the Proposed Borrowing
        Base shall become the new Borrowing Base and made available to Borrower,
        effective on the date specified in Section 2.1(e)(iii)(A).  If,
        however, at the end of such ten (10)-day period, all of the Lenders or the
        Required Lenders, as applicable, have not approved or deemed to have approved,
        as aforesaid, then Agent shall poll the Lenders to ascertain the highest
        Borrowing Base then acceptable to all of the Lenders or the Required Lenders
        and, so long as such amount does not increase the Borrowing Base then in
        effect,
        such amount shall become the new Borrowing Base, effective on the date specified
        in Section 2.1(e)(iii)(A).

       

      (A)  After
        a
        redetermined Borrowing Base is approved or is deemed to have been approved
        by
        all of the Lenders or the Required Lenders pursuant to Section 2.1(e)(iii),
        Agent shall notify Borrower and the Lenders of the amount of the redetermined
        Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become
        the new Borrowing Base, effective and applicable to Borrower, Agent, the
        Issuing
        Lenders and the Lenders.

       

      (iv)  Within
        three (3) Business Days after receipt from Agent of the New Borrowing Base
        Notice, Borrower shall have the right to request that the Required Lenders
        reduce the Borrowing Base until the next Scheduled Redetermination Date or
        Interim Redetermination Date occurs by giving written notification to Agent
        (which shall promptly notify the Lenders); and with the consent of the Required
        Lenders the Borrowing Base will be the amount set forth in such notice until
        the
        next Scheduled Redetermination Date or Interim Redetermination Date (subject
        to
        adjustment under Section 5.21(d) or clause (g) of the definition of “Permitted
        Dispositions”).

       

      (f)  Amounts
        borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms
        and conditions of this Agreement, reborrowed at any time during the term
        of this
        Agreement.  The outstanding principal amount of the Advances, together
        with interest accrued and unpaid thereon, shall be due and payable on the
        Maturity Date or, if earlier, on the date on which they are declared due
        and
        payable pursuant to the terms of this Agreement.

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      2.2  Term
        Loan.  Subject
        to the terms and conditions of this Agreement, on the Closing Date each Lender
        with a Term Loan Commitment agrees (severally, not jointly or jointly and
        severally) to make term loans (collectively, the “Term Loan”) to Borrower in an
        amount equal to such Lender’s Pro Rata Share of the Term Loan
        Amount.  The principal of the Term Loan shall be repaid annually in
        accordance with Section 2.4(c)(iii)(D), with the outstanding unpaid principal
        balance and all accrued and unpaid interest on the Term Loan becoming due
        and
        payable on the earliest of (i) the Maturity Date, (ii) the date of the
        acceleration of the Term Loan in accordance with the terms hereof, and (iii)
        the
        date of termination of this Agreement pursuant to Section 8.1(d).  All
        principal of, interest on, and other amounts payable in respect of the Term
        Loan
        shall constitute Obligations. Term Loan amounts borrowed and repaid hereunder
        may not be reborrowed.

       

      2.3  Borrowing
        Procedures and Settlements.

       

      (a)  Procedure
        for Borrowing.  Each Borrowing shall be made by an
        irrevocable written request by an Authorized Person delivered to
        Agent.  Unless Swing Lender is obligated to make a Swing Loan pursuant
        to Section 2.3(b) below, such notice must be received by Agent no later than
        10:00 a.m. (Georgia time) on the Business Day prior to the date that is the
        requested Funding Date specifying (i) the amount of such Borrowing, and (ii)
        the
        requested Funding Date, which shall be a Business Day; provided, however,
        that
        if Swing Lender elects to make a Swing Loan as to a requested Borrowing,
        such
        notice must be received by Agent no later than 10:00 a.m. (Georgia time)
        on the
        date that is the requested Funding Date.  At Agent’s election, in lieu
        of delivering the above-described written request, any Authorized Person
        may
        give Agent telephonic notice of such request by the required time.  In
        such circumstances, Borrower agrees that any such telephonic notice will
        be
        confirmed in writing within 24 hours of the giving of such telephonic notice,
        but the failure to provide such written confirmation shall not affect the
        validity of the request.

       

      (b)  Making
        of Swing Loans.  In the case of a request for an Advance and
        so long as either (i) the aggregate amount of Swing Loans made since the
        last
        Settlement Date, minus the amount of Collections or payments applied to Swing
        Loans since the last Settlement Date, plus the amount of the requested Advance
        does not exceed Five Million Dollars ($5,000,000), or (ii) Swing Lender,
        in its
        sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing
        limitation, Swing Lender shall make an Advance in the amount of such Borrowing
        (any such Advance made solely by Swing Lender pursuant to this Section 2.3(b)
        being referred to as a “Swing Loan” and such Advances being referred to
        collectively as “Swing Loans”) available to Borrower on the Funding Date
        applicable thereto by transferring immediately available funds to Borrower’s
        Designated Account.  Each Swing Loan shall be deemed to be an Advance
        hereunder and shall be subject to all the terms and conditions applicable
        to
        other Advances, except that all payments on any Swing Loan shall be payable
        to
        Swing Lender solely for its own account.  Subject to the provisions of
        Section 2.3(d)(ii), Swing Lender shall not make and shall not be obligated
        to
        make any Swing Loan if Swing Lender has actual knowledge that (i) one or
        more of
        the applicable conditions precedent set forth in Section 3 will not be satisfied
        on the requested Funding Date for the applicable Borrowing, or (ii) the
        requested Borrowing would exceed the Availability on such Funding
        Date.  Swing Lender shall not otherwise be required to determine
        whether the applicable conditions precedent set forth in Section 3 have been
        satisfied on the Funding Date applicable thereto prior to making any Swing
        Loan.  The Swing Loans shall be secured by Agent’s Liens, constitute
        Obligations hereunder, and bear interest at the rate applicable from time
        to
        time to Advances that are Base Rate Loans.

       

      (c)  Making
        of Loans.

       

      (i)  In
        the
        event that Swing Lender is not obligated to make a Swing Loan and does not
        elect
        to make a Swing Loan it is not obligated to make, then promptly after receipt
        of
        a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify
        the
        Lenders, not later than 1:00 p.m. (Georgia time) on the Business Day immediately
        preceding the Funding Date applicable thereto, by telecopy, telephone, or
        other
        similar form of transmission, of the requested Borrowing.  Each Lender
        shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing
        available to Agent in immediately available funds, to Agent’s Account, not later
        than 1:00 p.m. (Georgia time) on the Funding Date applicable
        thereto.  After Agent’s receipt of the proceeds of such Advances,
        Agent shall make the proceeds thereof available to Borrower on the applicable
        Funding Date by transferring immediately available funds equal to such proceeds
        received by Agent to the Designated Account; provided, however, that, subject
        to
        the provisions of Section 2.3(d)(ii), Agent shall not request any Lender
        to
        make, and no Lender shall have the obligation to make, any Advance if Agent
        shall have actual knowledge that (1) one or more of the applicable conditions
        precedent set forth in Section 3 will not be satisfied on the requested Funding
        Date for the applicable Borrowing unless such condition has been waived,
        or (2)
        the requested Borrowing would exceed the Availability on such Funding
        Date.

       

      (ii)  Unless
        Agent receives notice from a Lender prior to 9:00 a.m. (Georgia time) on
        the
        date of a Borrowing, that such Lender will not make available as and when
        required hereunder to Agent for the account of Borrower the amount of that
        Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
        made or will make such amount available to Agent in immediately available
        funds
        on the Funding Date and Agent may (but shall not be so required), in reliance
        upon such assumption, make available to Borrower on such date a corresponding
        amount.  If and to the extent any Lender shall not have made its full
        amount available to Agent in immediately available funds and Agent in such
        circumstances has made available to Borrower such amount, that Lender shall
        on
        the Business Day following such Funding Date make such amount available to
        Agent, together with interest at the Defaulting Lender Rate for each day
        during
        such period.  A notice submitted by Agent to any Lender with respect
        to amounts owing under this subsection shall be conclusive, absent manifest
        error.  If such amount is so made available, such payment to Agent
        shall constitute such Lender’s Advance on the date of Borrowing for all purposes
        of this Agreement.  If such amount is not made available to Agent on
        the Business Day following the Funding Date, Agent will notify Borrower of
        such
        failure to fund and, upon demand by Agent, Borrower shall pay such amount
        to
        Agent for Agent’s account, together with interest thereon for each day elapsed
        since the date of such Borrowing, at a rate per annum equal to the interest
        rate
        applicable at the time to the Advances composing such Borrowing.  The
        failure of any Lender to make any Advance on any Funding Date shall not relieve
        any other Lender of any obligation hereunder to make an Advance on such Funding
        Date, but no Lender shall be responsible for the failure of any other Lender
        to
        make the Advance to be made by such other Lender on any Funding
        Date.

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      (iii)  Agent
        shall not be obligated to transfer to a Defaulting Lender any payments made
        by
        Borrower to Agent for the Defaulting Lender’s benefit, and, in the absence of
        such transfer to the Defaulting Lender, Agent shall transfer any such payments
        to each other non-Defaulting Lender member of the Lender Group ratably in
        accordance with their Commitments (but only to the extent that such Defaulting
        Lender’s Advance was funded by the other members of the Lender Group) or, if so
        directed by Borrower and if no Default or Event of Default had occurred and
        is
        continuing (and to the extent such Defaulting Lender’s Advance was not funded by
        the Lender Group), retain same to be re-advanced to Borrower as if such
        Defaulting Lender had made Advances to Borrower.  Subject to the
        foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrower
        for the account of such Defaulting Lender the amount of all such payments
        received and retained by Agent for the account of such Defaulting
        Lender.  Solely for the purposes of voting or consenting to matters
        with respect to the Loan Documents, such Defaulting Lender shall be deemed
        not
        to be a “Lender” and such Lender’s Commitment shall be deemed to be
        zero.  This Section shall remain effective with respect to such Lender
        until (x) the Obligations under this Agreement shall have been declared or
        shall
        have become immediately due and payable, (y) the non-Defaulting Lenders,
        Agent,
        and Borrower shall have waived such Defaulting Lender’s default in writing, or
        (z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance
        and
        pays to Agent all amounts owing by Defaulting Lender in respect
        thereof.  The operation of this Section shall not be construed to
        increase or otherwise affect the Commitment of any Lender, to relieve or
        excuse
        the performance by such Defaulting Lender or any other Lender of its duties
        and
        obligations hereunder, or to relieve or excuse the performance by Borrower
        of
        its duties and obligations hereunder to Agent or to the Lenders other than
        such
        Defaulting Lender.  Any such failure to fund by any Defaulting Lender
        shall constitute a material breach by such Defaulting Lender of this Agreement
        and shall entitle Borrower at its option, upon written notice to Agent, to
        arrange for a substitute Lender to assume the Commitment of such Defaulting
        Lender, such substitute Lender to be acceptable to Agent.  In
        connection with the arrangement of such a substitute Lender, the Defaulting
        Lender shall have no right to refuse to be replaced hereunder, and agrees
        to
        execute and deliver a completed form of Assignment and Acceptance in favor
        of
        the substitute Lender (and agrees that it shall be deemed to have executed
        and
        delivered such document if it fails to do so) subject only to being repaid
        its
        share of the outstanding Obligations (other than Bank Product Obligations,
        but
        including an assumption of its Pro Rata Share of the Risk Participation
        Liability) without any premium or penalty of any kind whatsoever; provided,
        however, that any such assumption of the Commitment of such Defaulting Lender
        shall not be deemed to constitute a waiver of any of the Lender Groups’ or
        Borrower’s rights or remedies against any such Defaulting Lender arising out of
        or in relation to such failure to fund.

       

      (d)  Protective
        Advances and Optional Overadvances.

       

      (i)  Agent
        hereby is authorized by Borrower and the Lenders, from time to time in Agent’s
        sole discretion, (A) after the occurrence and during the continuance of a
        Default or an Event of Default, or (B) at any time that any of the other
        applicable conditions precedent set forth in Section 3 are not satisfied,
        to
        make Advances to Borrower on behalf of the Lenders that Agent, in its Permitted
        Discretion deems necessary or desirable (1) to preserve or protect the
        Collateral, or any portion thereof, (2) to enhance the likelihood of repayment
        of the Obligations (other than the Bank Product Obligations), or (3) to pay
        any
        other amount due and payable by Borrower pursuant to the terms of this
        Agreement, including, without duplication, Lender Group Expenses (when due
        and
        payable in accordance with Section 17.10) and the costs, fees, and expenses
        described in Section 9 (any of the Advances described in this Section 2.3(d)(i)
        shall be referred to as “Protective Advances”).

       

      (ii)  Any
        contrary provision of this Agreement notwithstanding, the Lenders hereby
        authorize Agent or Swing Lender, as applicable, and either Agent or Swing
        Lender, as applicable, may, but is not obligated to, knowingly and
        intentionally, continue to make Advances (including Swing Loans) to Borrower
        notwithstanding that an Overadvance exists or thereby would be created, so
        long
        as (A) after giving effect to such Advances, the outstanding Revolver Usage
        does
        not exceed the Borrowing Base by more than Three Million Dollars ($3,000,000),
        and (B) after giving effect to such Advances, the outstanding Revolver Usage
        (except for and excluding amounts charged to the Loan Account for interest,
        fees, or Lender Group Expenses) does not exceed the Maximum Revolver
        Amount.  In the event Agent obtains actual knowledge that the Revolver
        Usage exceeds the amounts permitted by the immediately foregoing provisions,
        regardless of the amount of, or reason for, such excess, Agent shall notify
        the
        Lenders as soon as practicable (and prior to making any (or any additional)
        intentional Overadvances (except for and excluding amounts charged to the
        Loan
        Account for interest, fees, or Lender Group Expenses) unless Agent determines
        that prior notice would result in imminent harm to the Collateral or its
        value),
        and the Lenders with Revolver Commitments thereupon shall, together with
        Agent,
        jointly determine the terms of arrangements that shall be implemented with
        Borrower intended to reduce, within a reasonable time, the outstanding principal
        amount of the Advances to Borrower to an amount permitted by the preceding
        sentence.  In such circumstances, if any Lender with a Revolver
        Commitment objects to the proposed terms of reduction or repayment of any
        Overadvance, the terms of reduction or repayment thereof shall be implemented
        according to the determination of the Required Lenders.  Each Lender
        with a Revolver Commitment shall be obligated to settle with Agent as provided
        in Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any
        unintentional Overadvances by Agent reported to such Lender, any intentional
        Overadvances made as permitted under this Section 2.3(d)(ii), and any
        Overadvances resulting from the charging to the Loan Account of interest,
        fees,
        or Lender Group Expenses.

       

      (iii)  Each
        Protective Advance and each Overadvance shall be deemed to be an Advance
        hereunder, except that no Protective Advance or Overadvance shall be eligible
        to
        be a LIBOR Rate Loan and, prior to Settlement therefor, all payments on the
        Protective Advances shall be payable to Agent solely for its own
        account.  The Protective Advances and Overadvances shall be repayable
        on demand, secured by Agent’s Liens, constitute Obligations hereunder, and bear
        interest at the rate applicable from time to time to Advances that are Base
        Rate
        Loans.  The provisions of this Section 2.3(d) are for the exclusive
        benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit
        Borrower in any way.

       

      (e)  Settlement.  It
        is agreed that each Lender’s funded portion of the Advances is intended by the
        Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
        Advances.  Such agreement notwithstanding, Agent, Swing Lender, and
        the other Lenders agree (which agreement shall not be for the benefit of
        Borrower) that in order to facilitate the administration of this Agreement
        and
        the other Loan Documents, settlement among the Lenders as to the Advances,
        the
        Swing Loans, and the Protective Advances shall take place on a periodic basis
        in
        accordance with the following provisions:

       

      
        
          
          

        

        
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      (i)  Agent
        shall request settlement (“Settlement”) with the Lenders on a weekly basis, or
        on a more frequent basis if so determined by Agent (1) on behalf of Swing
        Lender, with respect to the outstanding Swing Loans, (2) for itself, with
        respect to the outstanding Protective Advances, and (3) with respect to
        Borrower’s or its Subsidiaries’ Collections or payments received, as to each by
        notifying the Lenders by telecopy, telephone, or other similar form of
        transmission, of such requested Settlement, no later than 2:00 p.m. (Georgia
        time) on the Business Day immediately prior to the date of such requested
        Settlement (the date of such requested Settlement being the “Settlement
        Date”).  Such notice of a Settlement Date shall include a summary
        statement of the amount of outstanding Advances, Swing  Loans, and
        Protective Advances for the period since the prior Settlement
        Date.  Subject to the terms and conditions contained herein (including
        Section 2.3(c)(iii)): (y) if a Lender’s balance of the Advances (including
        Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata Share of the
        Advances (including Swing Loans and Protective Advances) as of a Settlement
        Date, then Agent shall, by no later than 3:00 p.m. (Georgia time) on the
        Settlement Date, transfer in immediately available funds to a Deposit Account
        of
        such Lender (as such Lender may designate), an amount such that each such
        Lender
        shall, upon receipt of such amount, have as of the Settlement Date, its Pro
        Rata
        Share of the Advances (including Swing Loans and Protective Advances), and
        (z)
        if a Lender’s balance of the Advances (including Swing Loans and Protective
        Advances) is less than such Lender’s Pro Rata Share of the Advances (including
        Swing Loans and Protective Advances) as of a Settlement Date, such Lender
        shall
        no later than 12:00 p.m. (Georgia time) on the Settlement Date transfer in
        immediately available funds to Agent’s Account, an amount such that each such
        Lender shall, upon transfer of such amount, have as of the Settlement Date,
        its
        Pro Rata Share of the Advances (including Swing Loans and Protective
        Advances).  Such amounts made available to Agent under clause (z) of
        the immediately preceding sentence shall be applied against the amounts of
        the
        applicable Swing Loans or Protective Advances and, together with the portion
        of
        such Swing Loans or Protective Advances representing Swing Lender’s Pro Rata
        Share thereof, shall constitute Advances of such Lenders.  If any such
        amount is not made available to Agent by any Lender on the Settlement Date
        applicable thereto to the extent required by the terms hereof, Agent shall
        be
        entitled to recover for its account such amount on demand from such Lender
        together with interest thereon at the Defaulting Lender Rate.

       

      (ii)  In
        determining whether a Lender’s balance of the Advances, Swing Loans, and
        Protective Advances is less than, equal to, or greater than such Lender’s Pro
        Rata Share of the Advances, Swing Loans, and Protective Advances as of a
        Settlement Date, Agent shall, as part of the relevant Settlement, apply to
        such
        balance the portion of payments actually received in good funds by Agent
        with
        respect to principal, interest, fees payable by Borrower and allocable to
        the
        Lenders hereunder, and proceeds of Collateral.  To the extent that a
        net amount is owed to any such Lender after such application, such net amount
        shall be distributed by Agent to that Lender as part of such next
        Settlement.

       

      (iii)  Between
        Settlement Dates, Agent, to the extent Protective Advances or Swing Loans
        are
        outstanding, may pay over to Agent or Swing Lender, as applicable, any
        Collections or payments received by Agent, that in accordance with the terms
        of
        this Agreement would be applied to the reduction of the Advances, for
        application to the Protective Advances or Swing Loans.  Between
        Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans
        are
        outstanding, may pay over to Swing Lender any payments received by Agent,
        that
        in accordance with the terms of this Agreement would be applied to the reduction
        of the Advances, for application to Swing Lender’s Pro Rata Share of the
        Advances.  If, as of any Settlement Date, Collections of Borrower or
        its Subsidiaries received since the then immediately preceding Settlement
        Date
        have been applied to Swing Lender’s Pro Rata Share of the Advances other than to
        Swing Loans, as provided for in the previous sentence, Swing Lender shall
        pay to
        Agent for the accounts of the Lenders, and Agent shall pay to the Lenders,
        to be
        applied to the outstanding Advances of such Lenders, an amount such that
        each
        Lender shall, upon receipt of such amount, have, as of such Settlement Date,
        its
        Pro Rata Share of the Advances.  During the period between Settlement
        Dates, Swing Lender with respect to Swing Loans, Agent with respect to
        Protective Advances, and each Lender (subject to the effect of agreements
        between Agent and individual Lenders) with respect to the Advances other
        than
        Swing Loans and Protective Advances, shall be entitled to interest at the
        applicable rate or rates payable under this Agreement on the daily amount
        of
        funds employed by Swing Lender, Agent, or the Lenders, as
        applicable.

       

      (f)  Notation.  Agent
        shall record on its books the principal amount of the Advances (or portion
        of
        the Term Loan, as applicable) owing to each Lender, including the Swing Loans
        owing to Swing Lender, and Protective Advances owing to Agent, and the interests
        therein of each Lender, from time to time and such records shall, absent
        manifest error, conclusively be presumed to be correct and
        accurate.

       

      (g)  Lenders’
        Failure to Perform.  All Advances (other than Swing Loans and
        Protective Advances) shall be made by the Lenders contemporaneously and in
        accordance with their Pro Rata Shares.  It is understood that (i) no
        Lender shall be responsible for any failure by any other Lender to perform
        its
        obligation to make any Advance (or other extension of credit) hereunder,
        nor
        shall any Commitment of any Lender be increased or decreased as a result
        of any
        failure by any other Lender to perform its obligations hereunder, and (ii)
        no
        failure by any Lender to perform its obligations hereunder shall excuse any
        other Lender from its obligations hereunder.

       

      2.4  Payments.

       

      (a)  Payments
        by Borrower.

       

      (i)  Except
        as
        otherwise expressly provided herein, all payments by Borrower shall be made
        to
        Agent’s Account for the account of the Lender Group and shall be made in
        immediately available funds, no later than 2:00 p.m. (Georgia time) on the
        date
        specified herein. Any payment received by Agent later than 2:00 p.m. (Georgia
        time) shall be deemed to have been received on the following Business Day
        and
        any applicable interest or fee shall continue to accrue until such following
        Business Day.

       

      (ii)  Unless
        Agent receives notice from Borrower prior to the date on which any payment
        is
        due to the Lenders that Borrower will not make such payment in full as and
        when
        required, Agent may assume that Borrower has made (or will make) such payment
        in
        full to Agent on such date in immediately available funds and Agent may (but
        shall not be so required), in reliance upon such assumption, distribute to
        each
        Lender on such due date an amount equal to the amount then due such
        Lender.  If and to the extent Borrower does not make such payment in
        full to Agent on the date when due, each Lender severally shall repay to
        Agent
        on demand such amount distributed to such Lender, together with interest
        thereon
        at the Defaulting Lender Rate for each day from the date such amount is
        distributed to such Lender until the date repaid.

       

      
        
          
          

        

        
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      (b)  Apportionment
        and Application.

       

      (i)  So
        long
        as no Event of Default has occurred and is continuing and except as otherwise
        provided with respect to Defaulting Lenders who would otherwise be entitled
        to
        receive such payments as provided herein, all principal and interest payments
        shall be apportioned ratably among the applicable Lenders (according to the
        unpaid principal balance of the Obligations to which such payments relate
        held
        by each Lender) and all payments of fees and expenses (other than fees or
        expenses that are for Agent’s separate account) shall be apportioned ratably
        among the Lenders having a Pro Rata Share of the type of Commitment or
        Obligation to which a particular fee or expense relates.  Except as
        otherwise specifically provided in Section 2.4(b)(iv) hereof or in Section
        2.4(d) hereof, all payments to be made hereunder by Borrower shall be remitted
        to Agent and, subject to Section 2.4(b)(iv), all such payments, and all proceeds
        of Collateral received by Agent, shall be applied, so long as no Event of
        Default has occurred and is continuing, to reduce the balance of the Advances
        outstanding or to make scheduled payments to repay the Term Loan as provided
        herein and, thereafter, to Borrower (to be wired to the Designated Account)
        or
        such other Person entitled thereto under applicable law.

       

      (ii)  At
        any
        time that an Event of Default has occurred and is continuing and except as
        otherwise provided with respect to Defaulting Lenders, all payments remitted
        to
        Agent and all proceeds of Collateral received by Agent shall be applied as
        follows:

       

      (A)  first,
        to
        pay any Lender Group Expenses (including cost or expense reimbursements)
        or
        indemnities then due to Agent under the Loan Documents, until paid in
        full,

       

      (B)  second,
        to pay any fees or premiums then due to Agent under the Loan Documents until
        paid in full,

       

      (C)  third,
        to
        pay interest due in respect of all Protective Advances until paid in
        full,

       

      (D)  fourth,
        to pay the principal of all Protective Advances until paid in full,

       

      (E)  fifth,
        ratably to pay any Lender Group Expenses (including cost or expense
        reimbursements) or indemnities then due to any of the Lenders under the Loan
        Documents, until paid in full,

       

      (F)  sixth,
        ratably to pay any fees or premiums then due to any of the Lenders with a
        Revolver Commitment or holding any Advance, until paid in full,

       

      (G)  seventh,
        ratably to pay interest due in respect of the Advances (other than Protective
        Advances), and the Swing Loans, until paid in full,

       

      (H)  eighth,
        ratably (i) to pay the principal of all Swing Loans until paid in full, (ii)
        to
        pay the principal of all Advances until paid in full, (iii) to Agent, to
        be held
        by Agent, for the ratable benefit of Issuing Lender and those Lenders having
        a
        Revolver Commitment or holding any Advance, as cash collateral in an amount
        up
        to one hundred five percent (105%) of the Letter of Credit Usage, (iv) to Agent, to be held
        by Agent, for
        the benefit of the Bank Product Providers, as cash collateral in an amount
        up to
        one hundred five percent (105%) of the amount of Bank Product Obligations
        in
        respect of Swap Agreements, and (v) to Agent to be held by Agent for the
        benefit
        of the Bank Product Obligations as cash collateral in an amount not to
        exceed the amount of the Bank Product Reserve established prior to the
        occurrence of, and not in contemplation of, the subject Event of
        Default,

       

      (I)  ninth,
        ratably to pay any fees or premiums then due to any of the Lenders with a
        Term
        Loan Commitment or holding any Term Loan, until paid in full,

       

      (J)  tenth,
        ratably to pay interest due in respect of the Term Loan, until paid in
        full,

       

      (K)  eleventh,
        to pay the outstanding principal balance of the Term Loan (in the inverse
        order
        of the maturity of the installments due thereunder) until the Term Loan is
        paid
        in full,

       

      (L)  twelfth,
        to pay any other Obligations (including the provision of amounts to Agent,
        to be
        held by Agent, for the benefit of the Bank Product Providers, as cash collateral
        in an amount up to the amount determined by Agent in its Permitted Discretion
        as
        the amount necessary to secure Parent’s and its Subsidiaries’ obligations in
        respect of Bank Products), and

       

      (M)  thirteenth,
        to Borrowers (to be wired to the Designated Account) or such other Person
        entitled thereto under applicable law.

       

      (iii)  Agent
        promptly shall distribute to each Lender, pursuant to the applicable wire
        instructions received from each Lender in writing, such funds as it may be
        entitled to receive, subject to a Settlement delay as provided in Section
        2.3(e).

       

      (iv)  In
        each
        instance, so long as no Event of Default has occurred and is continuing,
        Section
        2.4(b)(i) and Section 2.4(b)(ii) shall not apply to any payment made
        by Borrower to Agent and specified by Borrower to be for the payment of specific
        Obligations then due and payable (or prepayable) under any provision of this
        Agreement.

       

      
        
          
          

        

        
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      (v)  For
        purposes of Section 2.4(b)(ii) (other than clause (L) thereof), “paid in full”
means payment of all amounts owing under the Loan Documents according to
        the
        terms thereof, including loan fees, service fees, professional fees, interest
        (and specifically including in each case interest and such fees
        accrued after the commencement of any Insolvency Proceeding), default
        interest, interest on interest, and expense reimbursements, whether or not
        any
        of the foregoing (other than disallowed interest and disallowed loan fees,
        if
        any) would be allowed or disallowed in whole or in part in any Insolvency
        Proceeding; provided however, that for the purposes of Section 2.4(b)(ii)(L),
        “paid in full” means payment of all amounts owing under the Loan Documents
        according to the terms hereof, including loan fees, service fees, professional
        fees, interest (and specifically including interest and fees accrued after
        the
        commencement of any Insolvency Proceeding), default interest, interest on
        interest, and expense reimbursements, whether or not any of the foregoing
        would
        be or is allowed or disallowed in whole or in part in any Insolvency
        Proceeding.

       

      (vi)  In
        the
        event of a direct conflict between the priority provisions of this Section
        2.4
        and any other provision contained in any other Loan Document, it is the
        intention of the parties hereto that such provisions be read together and
        construed, to the fullest extent possible, to be in concert with each
        other.  In the event of any actual, irreconcilable conflict that
        cannot be resolved as aforesaid, the terms and provisions of this Section
        2.4
        shall control and govern.

       

      (c)  Prepayments.

       

      (i)  Excess
        Revolver Usage.  If at any time the sum of the
        aggregate principal amount of the outstanding Advances, the outstanding Letter
        of Credit Usage, the Bank Product Reserve and the aggregate amount of reserves,
        if any, established by Agent under Section 2.1 exceeds the lesser of (x)
        the
        Borrowing Base and (y) the Maximum Revolver Amount, Borrower shall prepay
        the
        Obligations in an amount equal to such excess which prepayments shall be
        applied
        in the manner set forth in Section 2.4(d).

       

      (ii)  Optional
        Prepayments.  The Term Loan may be voluntarily prepaid in
        full or in part at any time; provided that in the case of any prepayment
        not associated with a termination pursuant to Section 3.4, (x) no Event of
        Default shall have occurred or be continuing either immediately before or
        immediately after such prepayment and (y) there shall be at least Ten Million
        Dollars ($10,000,000) of Availability both immediately before and after such
        prepayment.  Each such prepayment shall be in an amount which is an
        integral multiple of Five Million Dollars ($5,000,000) or any greater amount
        which is a multiple of Five Hundred Thousand Dollars ($500,000), shall be
        made
        by Borrower and shall be irrevocable.

       

      (iii)  Mandatory
        Prepayments.

       

      (A)  Dispositions.
        Promptly, and in any event not later than one (1) Business Day following
        the
        receipt by Parent or any of its Subsidiaries of the proceeds of any voluntary
        or
        involuntary sale or disposition by Parent or any of its Subsidiaries of property
        or assets (including casualty losses or condemnations but excluding sales
        or
        dispositions which qualify as Permitted Dispositions under clauses (a), (b),
        (c), (d), (e) or (f) of the definition of Permitted Dispositions), Borrower
        shall prepay the outstanding principal amount of the Obligations in accordance
        with Section 2.4(d) in an amount equal to one hundred percent (100%) of
        such Net Cash Proceeds (including condemnation awards and payments in lieu
        thereof) received by such Person in connection with such sales or dispositions;
        provided that, so long as (A) no Default or Event of Default shall have occurred
        and is continuing, (B) Borrower shall have given Agent prior written notice
        of
        Parent’s or its Subsidiaries’ intention to apply such monies to the costs of
        replacement of the properties or assets that are the subject of such sale
        or
        disposition, (C) the monies are held in a cash collateral account in which
        Agent
        has a perfected first-priority security interest, and (D) Parent or its
        Subsidiaries, as applicable, complete such replacement within one hundred
        eighty
        (180) days after the initial receipt of such monies, Parent and its Subsidiaries
        shall have the option to apply such monies to the costs of replacement of
        the
        property or assets that are the subject of such sale or disposition unless
        and
        to the extent that such applicable period shall have expired without such
        replacement, purchase or construction being made or completed, in which case,
        any amounts remaining in the cash collateral account shall be paid to Agent
        and
        applied in accordance with Section 2.4(d).  Nothing contained in this
        Section 2.4(c)(iii)(A) shall permit Parent or any of its Subsidiaries to
        sell or otherwise dispose of any property or assets other than in accordance
        with Section 6.4.

       

      (B)  Extraordinary
        Receipts. (i) Promptly, and in any event not later than one (1) Business
        Day
        following the receipt by Parent or any of its Subsidiaries of any Extraordinary
        Receipts, Borrower shall prepay the outstanding principal amount of the
        Obligations in accordance with Section 2.4(d) in an amount equal to 100%
        of such
        Extraordinary Receipts, net of any reasonable expenses incurred in collecting
        such Extraordinary Receipts; provided however that Borrower shall not be
        obligated to prepay the Obligations in connection with the receipt by Parent’s
        or any of its Subsidiaries’ of a Tax Refunds that is less than $100,000 at any
        one time.  Notwithstanding the foregoing, if the amount of
        Extraordinary Receipts from Tax Refunds not used to prepay the Obligations
        in
        accordance with this subsection (B) shall exceed $2,000,000 in the aggregate
        over the term of this Agreement, all Tax Refunds received above such $2,000,000
        (regardless of whether they exceed $100,000 at any one time) shall be applied
        to
        prepay the Obligations as set forth in this subsection (B).

       

      (C)  Debt
        or
        Issuances of Disqualified Stock.  Promptly, and in any event not later
        than one (1) Business Day, following the issuance or incurrence by Parent
        or any of its Subsidiaries of any Indebtedness (other than Indebtedness
        permitted under Section 6.1) or the issuance by Parent or any of its
        Subsidiaries of any shares of its or their Stock (other than in the event
        that
        Parent or any Subsidiary thereof forms a Subsidiary in accordance with the
        terms
        hereof, the issuance by such Subsidiary of Stock to Parent or such Subsidiary,
        as applicable), Borrower shall prepay the outstanding principal amount of
        the
        Obligations in accordance with Section 2.4(d) in an amount equal to 100%
        of the
        Net Cash Proceeds received by such Person in connection with such incurrence of
        Indebtedness or such issuance of Stock. The provisions of this Section
        2.4(c)(iv)(C) shall not be deemed to be implied consent to any such issuance
        or
        incurrence otherwise prohibited by the terms and conditions of this
        Agreement.

       

      (D)  Excess
        Cash Flow.  Within ten (10) days of delivery to Agent and the Lenders
        of audited annual financial statements pursuant to Section 5.3, commencing
        with
        the delivery to Agent and the Lenders of the financial statements for Parent’s
        fiscal year ended December 31, 2008 or, if such financial statements are
        not
        delivered to Agent and the Lenders on the date such statements are required
        to
        be delivered pursuant to Section 5.3, ten (10) days after the date such
        statements are required to be delivered to Agent and the Lenders pursuant
        to
        Section 5.3, Borrower shall prepay the outstanding principal amount of the
        Obligations in accordance with Section 2.4(d) in an amount equal to fifty
        percent (50%) of the Excess Cash Flow of Parent and its Subsidiaries for
        such
        fiscal year.

       

      
        
          
          

        

        
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      (d)  Application
        of Payments.  Each prepayment pursuant to any clause of
        Section 2.4(c)(iii) above shall (A) so long as no Event of Default shall
        have occurred and be continuing and subject to the last sentence of this
        subsection, be applied, first, to the outstanding principal amount of
        the Advances, but solely to the extent necessary to increase the Availability
        at
        such time to Ten Million Dollars ($10,000,000) (with no reduction to the
        Maximum
        Revolver Amount), second, to the outstanding principal amount of the
        Term Loan until paid in full, third, to the outstanding principal
        amount of the Advances until paid in full, and fourth, to cash
        collateralize the Letters of Credit in an amount equal to one hundred five
        percent (105%) of the then extant Letter of Credit Usage, and (B) if an
        Event of Default shall have occurred and be continuing, be applied in the
        manner
        set forth in Section 2.4(b)(ii).  Notwithstanding the foregoing,
        any prepayment resulting from the sale of any Collateral comprising the
        Borrowing Base shall be applied first to the outstanding principal amount
        of the
        Advances, and then to the Term Loans to be apportioned among the Term Loan
        Lenders pro rata.

       

      2.5  Overadvances.  If,
        at any time or for any reason, the amount of Obligations owed by Borrower
        to the
        Lender Group pursuant to Section 2.1 or Section 2.12 is greater than any
        of the
        limitations set forth in Section 2.1 or Section 2.12, as applicable (an
“Overadvance”), Borrower immediately shall pay to Agent, in cash, the amount of
        such excess, which amount shall be used by Agent to reduce the Obligations
        in
        accordance with the priorities set forth in Section 2.4(b).  Borrower
        promises to pay the Obligations (including principal, interest, fees, costs,
        and
        expenses) in Dollars in full on the Maturity Date or, if earlier, on the
        date on
        which the Obligations are declared due and payable pursuant to the terms
        of this
        Agreement.

       

      2.6  Interest
        Rates and Letter of Credit Fee:  Rates, Payments, and
        Calculations.

       

      (a)  Interest
        Rates.  Except as provided in Section 2.6(c), all Obligations
        (except for undrawn Letters of Credit and except for Bank Product Obligations)
        that have been charged to the Loan Account pursuant to the terms hereof shall
        bear interest on the Daily Balance thereof as follows:

       

      (i)  if
        the
        relevant Obligation is an Advance that is (A) a LIBOR Rate Loan, at a per
        annum
        rate equal to the LIBOR Rate plus the LIBOR Rate Margin applicable to an
        Advance
        (except to the extent an Advance is converted from a LIBOR Rate Loan to a
        Base
        Rate Loan pursuant to Section 2.13(a)) or (B) a Base Rate Loan, at a per
        annum rate equal to the Base Rate plus the Base Rate Margin applicable to
        an
        Advance; or

       

      (ii)  if
        the
        relevant Obligation relates to the Term Loan that is (A) a LIBOR Rate Loan,
        at a
        per annum rate equal to (a) the LIBOR Rate plus the LIBOR Rate Margin applicable
        to the Term Loan; provided that if an event described in Section 2.13(d)(ii)
        shall occur, the interest on the Term Loan shall accrue at a per annum rate
        equal to the Base Rate plus the Base Rate Margin applicable to the Term Loan
        or
        (B) a Base Rate Loan, at a per annum rate equal to the Base Rate plus the
        Base
        Rate Margin applicable to an Advance.

       

      (b)  Letter
        of Credit Fee.  Borrower shall pay Agent (for the ratable
        benefit of the Lenders with a Revolver Commitment, subject to any agreements
        between Agent and individual Lenders), a Letter of Credit fee (in addition
        to
        the charges, commissions, fees, and costs set forth in Section 2.12(e)) which
        shall accrue at a rate equal to 2.0% per annum times the Daily Balance
        of the undrawn amount of all outstanding Letters of Credit.

       

      (c)  Default
        Rate.  At the election of Agent or the Required Lenders upon
        the occurrence and during the continuation of an Event of Default,

       

      (i)  all
        unpaid Obligations (except for undrawn Letters of Credit and except for Bank
        Product Obligations) that have been charged to the Loan Account pursuant
        to the
        terms hereof shall bear interest on the Daily Balance thereof at a per annum
        rate equal to two (2) percentage points above the per annum rate otherwise
        applicable hereunder, and

       

      (ii)  the
        Letter of Credit fee provided for in Section 2.6(b) shall be increased to
        two
        (2) percentage points above the per annum rate otherwise applicable
        hereunder.

       

      (d)  Payment.  Except
        as provided to the contrary in Section 2.11 or Section 2.13(a), interest,
        Letter
        of Credit fees, and all other fees payable hereunder shall be due and payable,
        in arrears, on the first day of each calendar month at any time that Obligations
        or Commitments are outstanding.  Borrower hereby authorizes Agent to
        charge all interest and fees (when due and payable), all Lender Group Expenses
        (after the same become due and payable in accordance with Section 17.10),
        all
        charges, commissions, fees, and costs provided for in Section 2.12(e) (as
        and when due and payable), all fees and costs provided for in
        Section 2.11 (as and when due and payable), and all other payments as
        and when due and payable under any Loan Document (including the amounts due
        and
        payable with respect to the Term Loan and including any amounts due and payable
        to the Bank Product Providers in respect of Bank Products up to the amount
        of
        the Bank Product Reserve) to the Loan Account, which amounts thereafter shall
        constitute Advances hereunder and shall accrue interest at the rate then
        applicable to Advances that are Base Rate Loans.  Any interest not
        paid when due shall be compounded by being charged to the Loan Account and
        shall
        thereafter constitute Advances hereunder and shall accrue interest at the
        rate
        then applicable to Advances that are Base Rate Loans; provided, however that
        if,
        at any time that any amounts due in respect of interest on the Term Loan
        or any
        amount due and payable to the Bank Product Reserve are charged to the Loan
        Account, an Event of Default or Overadvance exists, or would result therefrom,
        such amounts shall not constitute Advances but instead shall continue to
        remain
        outstanding as amounts due in respect of the Term Loan or any amount due
        and
        payable to the Bank Product Providers in respect of the Bank Products up
        to the
        amount of the Bank Product Reserve, and such amounts shall be compounded
        and
        added to the outstanding principal balance of the Term Loan; provided, further,
        however, that the failure to make any such payment and the compounding of
        such
        interest shall nonetheless constitute an Event of Default under Section
        7.1.

       

      (e)  Computation.  All
        interest and fees chargeable under the Loan Documents shall be computed on
        the
        basis of a 360 day year for the actual number of days elapsed.  In the
        event the Base Rate is changed from time to time hereafter, the rates of
        interest hereunder based upon the Base Rate automatically and immediately
        shall
        be increased or decreased by an amount equal to such change in the Base
        Rate.

       

      
        
          
          

        

        
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      (f)  Intent
        to Limit Charges to Maximum Lawful Rate.  In no event shall
        the interest rate or rates payable under this Agreement, plus any other amounts
        paid in connection herewith, exceed the highest rate permissible under any
        law
        that a court of competent jurisdiction shall, in a final determination, deem
        applicable.  Borrower and the Lender Group, in executing and
        delivering this Agreement, intend legally to agree upon the rate or rates
        of
        interest and manner of payment stated within it; provided, however, that,
        anything contained herein to the contrary notwithstanding, if said rate or
        rates
        of interest or manner of payment exceeds the maximum allowable under applicable
        law, then, ipso facto, as of the date of this Agreement, Borrower is
        and shall be liable only for the payment of such maximum as allowed by law,
        and
        payment received from Borrower in excess of such legal maximum, whenever
        received, shall be applied to reduce the principal balance of the Obligations
        to
        the extent of such excess.

      
         

      

      2.7  Cash
        Management.

       

      (a)  Borrower
        shall and shall cause each of its Subsidiaries to (i) establish and maintain
        cash management services of a type and on terms satisfactory to Agent (it
        being
        agreed that the terms in effect on the Closing Date are satisfactory) at
        one or
        more of the banks set forth on Schedule 2.7(a) (each a “Cash Management Bank”),
        and shall request in writing and otherwise take such reasonable steps to
        ensure
        that, except as permitted by Section 6.12, all of its and its Subsidiaries’
Account Debtors forward payment of the amounts owed by them directly to such
        Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
        and in
        any event no later than three Business Days after the date of receipt thereof,
        all of their Collections (including those sent directly by their Account
        Debtors
        to Borrower or one of its Subsidiaries) into a bank account (the “Cash
        Management Accounts”) at one of the Cash Management Banks.

       

      (b)  Each
        Cash
        Management Bank shall establish and maintain Cash Management Agreements with
        Agent and Borrower.  Unless otherwise approved by the Agent, each such
        Cash Management Agreement shall provide, among other things, that (i) the
        Cash
        Management Bank will comply with any instructions originated by Agent directing
        the disposition of the funds in such Cash Management Account without further
        consent by Borrower or its Subsidiaries, as applicable, (ii) the Cash Management
        Bank has no rights of setoff or recoupment or any other claim against the
        applicable Cash Management Account other than for payment of its service
        fees
        and other charges directly related to the administration of such Cash Management
        Account and for returned checks or other items of payment, and (iii) upon
        the
        instruction of the Agent (an “Activation Instruction”), it will forward by daily
        sweep all amounts in the applicable Cash Management Account to the Agent’s
        Account.  Agent agrees not to issue an Activation Instruction with
        respect to the Cash Management Accounts unless a Triggering Event has occurred
        and is continuing at the time such Activation Instruction is
        issued.

       

      (c)  So
        long
        as no Default or Event of Default has occurred and is continuing, Borrower
        may
        amend Schedule 2.7(a) to add or replace a Cash Management Bank or Cash
        Management Account; provided, however, that (i) such prospective Cash Management
        Bank shall be reasonably satisfactory to Agent, and (ii) prior to the time
        of
        the opening of such Cash Management Account, Borrower (or its Subsidiary,
        as
        applicable) and such prospective Cash Management Bank shall have executed
        and
        delivered to Agent a Cash Management Agreement.  Borrower (or its
        Subsidiaries, as applicable) shall close any of its Cash Management Accounts
        (and establish replacement cash management accounts in accordance with the
        foregoing sentence) promptly and in any event within thirty (30) days of
        notice
        from Agent that the creditworthiness of any Cash Management Bank is no longer
        acceptable in Agent’s reasonable judgment, or as promptly as practicable and in
        any event within sixty (60) days of notice from Agent that the operating
        performance, funds transfer, or availability procedures or performance of
        the
        Cash Management Bank with respect to Cash Management Accounts or Agent’s
        liability under any Cash Management Agreement with such Cash Management Bank
        is
        no longer acceptable in Agent’s reasonable judgment.

       

      (d)  Each
        Cash
        Management Account shall be a cash collateral account subject to a Control
        Agreement.

       

      2.8  Crediting
        Payments.  The
        receipt of any payment item by Agent (whether from transfers to Agent by
        the
        Cash Management Banks pursuant to the Cash Management Agreements or otherwise)
        shall not be considered a payment on account unless such payment item is
        a wire
        transfer of immediately available federal funds made to Agent’s Account or
        unless and until such payment item is honored when presented for
        payment.  Should any payment item not be honored when presented for
        payment, then Borrower shall be deemed not to have made such payment and
        interest shall be calculated accordingly.  Anything to the contrary
        contained herein notwithstanding, any payment item shall be deemed received
        by
        Agent only if it is received into Agent’s Account on a Business Day on or before
        2:00 p.m. (Georgia time).  If any payment item is received into
        Agent’s Account on a non-Business Day or after 2:00 p.m. (Georgia time) on a
        Business Day, it shall be deemed to have been received by Agent as of the
        opening of business on the immediately following Business
        Day.  

       

      2.9  Designated
        Account.  Agent
        is authorized to make the Advances, and Issuing Lender is authorized to issue
        or
        cause the issuance the Letters of Credit, under this Agreement based upon
        telephonic or other instructions received from anyone purporting to be an
        Authorized Person or, without instructions, if pursuant to Section
        2.6(d).  Borrower agrees to establish and maintain the Designated
        Account with the Designated Account Bank for the purpose of receiving the
        proceeds of the Advances requested by Borrower and made by Agent or the Lenders
        hereunder.  Unless otherwise directed in writing by Borrower and
        agreed to by Agent, any Advance, Protective Advance, or Swing Loan requested
        by
        Borrower and made by Agent or the Lenders hereunder shall be made to the
        Designated Account.

       

      2.10  Maintenance
        of Loan Account; Statements of Obligations.  Agent
        shall maintain an account on its books in the name of Borrower (the “Loan
        Account”) on which Borrower will be charged with the Term Loan, all Advances
        (including Protective Advances and Swing Loans) made by Agent, Swing Lender,
        or
        the Lenders to Borrower or for Borrower’s account, the Letters of Credit issued
        by Issuing Lender for Borrower’s account, and with all other payment Obligations
        hereunder or under the other Loan Documents (except for Bank Product
        Obligations), including, accrued interest, fees and expenses, and Lender
        Group
        Expenses.  In accordance with Section 2.8, the Loan Account will be
        credited with all payments received by Agent from Borrower or for Borrower’s
        account, including all amounts received in Agent’s Account from any Cash
        Management Bank.  Agent shall render monthly statements regarding the
        Loan Account to Borrower, including principal, interest, fees, and including
        an
        itemization in reasonable detail of all charges and expenses constituting
        Lender
        Group Expenses owing, and such statements, absent manifest error, shall be
        conclusively presumed to be correct and accurate and constitute an account
        stated between Borrower and the Lender Group unless, within 30 days after
        receipt thereof by Borrower, Borrower shall deliver to Agent written objection
        thereto describing the error or errors contained in any such
        statements.

       

      2.11  Fees.  Borrower
        shall pay to Agent, as and when due and payable under the terms of the Fee
        Letter, the fees set forth in the Fee Letter.

       

      
        
          
          

        

        
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      2.12  Letters
        of Credit.

       

      (a)  Subject
        to the terms and conditions of this Agreement, the Issuing Lender agrees
        to
        cause the Underlying Issuer to issue letters of credit for the account of
        Borrower or its Subsidiaries (each, an “L/C”), whether by purchasing
        participations, executing indemnities or reimbursement obligations, or otherwise
        (each such commitment, an “L/C Undertaking”) with respect to letters of credit
        issued by an Underlying Issuer (the Underlying Issuer shall be Wells Fargo
        or
        such other bank acceptable to Agent and as may be reasonably approved by
        Borrower) for the account of Borrower.  Each request for the issuance
        of a Letter of Credit, or the amendment, renewal, or extension of any
        outstanding Letter of Credit, shall be made in writing by an Authorized Person
        and delivered to the Issuing Lender and Agent via hand delivery, telefacsimile,
        or other electronic method of transmission reasonably in advance of the
        requested date of issuance, amendment, renewal, or extension.  Each
        such request shall be in form and substance satisfactory to the Issuing Lender
        in its Permitted Discretion and shall specify (i) the amount of such Letter
        of
        Credit, (ii) the date of issuance, amendment, renewal, or extension of such
        Letter of Credit, (iii) the expiration date of such Letter of Credit, (iv)
        the
        name and address of the beneficiary thereof (or the beneficiary of the
        Underlying Letter of Credit, as applicable), and (v) such other information
        (including, in the case of an amendment, renewal, or extension, identification
        of the outstanding Letter of Credit to be so amended, renewed, or extended)
        as
        shall be necessary to prepare, amend, renew, or extend such Letter of
        Credit.  If requested by the Issuing Lender, Borrower also shall be an
        applicant under the application with respect to any Underlying Letter of
        Credit
        that is to be the subject of an L/C Undertaking.  The Issuing Lender
        shall have no obligation to issue a Letter of Credit if any of the following
        would result after giving effect to the issuance of such requested Letter
        of
        Credit:

       

      (i)  the
        Letter of Credit Usage would exceed the Borrowing Base less the
        outstanding amount of Advances, less the Bank Product Reserve, and
less the aggregate amount of reserves, if any, established
        by Agent
        under Section 2.1(b), or

       

      (ii)  the
        Letter of Credit Usage would exceed Five Million Dollars ($5,000,000),
        or

       

      (iii)  the
        Letter of Credit Usage would exceed the Maximum Revolver Amount less
the outstanding amount of Advances less the Bank Product Reserve,
        and less the aggregate amount of reserves, if any, established by Agent
        under Section 2.1(b).

       

      Each
        Letter of Credit (and corresponding Underlying Letter of Credit) shall be
        in
        form and substance acceptable to the Issuing Lender (in the exercise of its
        Permitted Discretion), including the requirement that the amounts payable
        thereunder must be payable in Dollars.  If Issuing Lender is obligated
        to advance funds under a Letter of Credit, Borrower immediately shall reimburse
        such L/C Disbursement to Issuing Lender by paying to Agent an amount equal
        to
        such L/C Disbursement (i) not later than 2:00 p.m., Georgia time, on the
        date
        that such L/C Disbursement is made, if Borrower shall have received written
        or
        telephonic notice of such L/C Disbursement prior to 1:00 p.m., Georgia time,
        on
        such date, or, (ii) if such notice has not been received by Borrower prior
        to
        such time on such date, then not later than 2:00 p.m., Georgia time, on the
        Business Day that Borrower receives such notice, if such notice is received
        prior to 1:00 p.m., Georgia time, on the date of receipt, and, in the absence
        of
        such reimbursement, the L/C Disbursement immediately and automatically shall
        be
        deemed to be an Advance hereunder and, initially, shall bear interest at
        the
        rate then applicable to Advances that are Base Rate Loans.  To the
        extent an L/C Disbursement is deemed to be an Advance hereunder, Borrower’s
        obligation to reimburse such L/C Disbursement shall be discharged and replaced
        by the resulting Advance.  Promptly following receipt by Agent of any
        payment from Borrower pursuant to this paragraph, Agent shall distribute
        such
        payment to the Issuing Lender or, to the extent that Lenders have made payments
        pursuant to Section 2.12(b) to reimburse the Issuing Lender, then to such
        Lenders and the Issuing Lender as their interests may appear.

       

      (b)  Promptly
        following receipt of a notice of L/C Disbursement pursuant to
        Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its
        Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection
        on the same terms and conditions as if Borrower had requested such Advance
        and
        Agent shall promptly pay to Issuing Lender the amounts so received by it
        from
        the Lenders.  By the issuance of a Letter of Credit (or an amendment
        to a Letter of Credit increasing the amount thereof) and without any further
        action on the part of the Issuing Lender or the Lenders with Revolver
        Commitments, the Issuing Lender shall be deemed to have granted to each Lender
        with a Revolver Commitment, and each Lender with a Revolver Commitment shall
        be
        deemed to have purchased, a participation in each Letter of Credit, in an
        amount
        equal to its Pro Rata Share of the Risk Participation Liability of such Letter
        of Credit, and each such Lender agrees to pay to Agent, for the account of
        the
        Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing
        Lender under such Letter of Credit.  In consideration and in
        furtherance of the foregoing, each Lender with a Revolver Commitment hereby
        absolutely and unconditionally agrees to pay to Agent, for the account of
        the
        Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by
        the Issuing Lender and not reimbursed by Borrower on the date due as provided
        in
        Section 2.12(a), or of any reimbursement payment required to be refunded
        to
        Borrower for any reason.  Each Lender with a Revolver Commitment
        acknowledges and agrees that its obligation to deliver to Agent, for the
        account
        of the Issuing Lender, an amount equal to its respective Pro Rata Share of
        each
        L/C Disbursement made by the Issuing Lender pursuant to this Section 2.12(b)
        shall be absolute and unconditional and such remittance shall be made
        notwithstanding the occurrence or continuation of an Event of Default or
        Default
        or the failure to satisfy any condition set forth in Section 3.  If
        any such Lender fails to make available to Agent the amount of such Lender’s Pro
        Rata Share of each L/C Disbursement made by the Issuing Lender in respect
        of
        such Letter of Credit as provided in this Section, such Lender shall be deemed
        to be a Defaulting Lender and Agent (for the account of the Issuing Lender)
        shall be entitled to recover such amount on demand from such Lender together
        with interest thereon at the Defaulting Lender Rate until paid in
        full.

       

      (c)  Borrower
        hereby agrees to indemnify, save, defend, and hold the Lender Group harmless
        from any loss, cost, expense, or liability, and reasonable attorneys fees
        incurred by the Lender Group arising out of or in connection with any Letter
        of
        Credit; provided, however, that Borrower shall not be obligated hereunder
        to
        indemnify for any loss, cost, expense, or liability to the extent that it
        is
        caused by the gross negligence or willful misconduct of the Issuing Lender
        or
        any other member of the Lender Group.  Borrower agrees to be bound by
        the Underlying Issuer’s regulations and interpretations of any Underlying Letter
        of Credit or by Issuing Lender’s interpretations of any L/C issued by Issuing
        Lender to or for Borrower’s account, even though this interpretation may be
        different from Borrower’s own, and Borrower understands and agrees that the
        Lender Group shall not be liable for any error, negligence, or mistake, whether
        of omission or commission, in following Borrower’s instructions or those
        contained in the Letter of Credit or any modifications, amendments, or
        supplements thereto.  Borrower understands that the L/C Undertakings
        may require Issuing Lender to indemnify the Underlying Issuer for certain
        costs
        or liabilities arising out of claims by Borrower against such Underlying
        Issuer.  Borrower hereby agrees to indemnify, save, defend, and hold
        the Lender Group harmless with respect to any loss, cost, expense (including
        reasonable attorneys fees), or liability incurred by the Lender Group under
        any
        L/C Undertaking as a result of the Lender Group’s indemnification of any
        Underlying Issuer; provided, however, that Borrower shall not be obligated
        hereunder to indemnify for any loss, cost, expense, or liability to the extent
        that it is caused by the gross negligence or willful misconduct of the Issuing
        Lender or any other member of the Lender Group.  Borrower hereby
        acknowledges and agrees that neither the Lender Group nor the Issuing Lender
        shall be responsible for delays, errors, or omissions resulting from the
        malfunction of equipment in connection with any Letter of Credit.

      
        
          
          

        

        
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      (d)  Borrower
        hereby authorizes and directs any Underlying Issuer to deliver to the Issuing
        Lender all instruments, documents, and other writings and property received
        by
        such Underlying Issuer pursuant to such Underlying Letter of Credit and to
        accept and rely upon the Issuing Lender’s instructions with respect to all
        matters arising in connection with such Underlying Letter of Credit and the
        related application.

       

      (e)  Any
        and
        all issuance charges, commissions, fees, and costs incurred by the Issuing
        Lender relating to Underlying Letters of Credit shall be Lender Group Expenses
        for purposes of this Agreement and shall be reimbursable by Borrower to Agent
        for the account of the Issuing Lender; it being acknowledged and agreed by
        Borrower that, as of the Closing Date, the issuance charge imposed by the
        Underlying Issuer is 0.825% per annum times the undrawn amount of each
        Underlying Letter of Credit, that such issuance charge may be changed from
        time
        to time, and that the Underlying Issuer also imposes a schedule of charges
        for
        amendments, extensions, drawings, and renewals.

       

      (f)  If
        by
        reason of (i) any change after the Closing Date in any applicable law, treaty,
        rule, or regulation or any change in the interpretation or application thereof
        by any Governmental Authority, or (ii) compliance by the Underlying Issuer
        or
        the Lender Group with any direction, request, or requirement (irrespective
        of
        whether having the force of law) of any Governmental Authority or monetary
        authority including, Regulation D of the Federal Reserve Board as from time
        to
        time in effect (and any successor thereto):

       

      (i)  any
        reserve, deposit, or similar requirement is or shall be imposed or modified
        in
        respect of any Letter of Credit issued hereunder, or

       

      (ii)  there
        shall be imposed on the Underlying Issuer or the Lender Group any other
        condition regarding any Underlying Letter of Credit or any Letter of Credit
        issued pursuant hereto,

       

      and
        the
        result of the foregoing is to increase, directly or indirectly, the cost
        to the
        Lender Group of issuing, making, guaranteeing, or maintaining any Letter
        of
        Credit or to reduce the amount receivable in respect thereof by the Lender
        Group, then, and in any such case, Agent may, at any time within a reasonable
        period after the additional cost is incurred or the amount received is reduced,
        notify Borrower, and Borrower shall pay on demand such amounts as Agent may
        specify to be necessary to compensate the Lender Group for such additional
        cost
        or reduced receipt, together with interest on such amount from the date of
        such
        demand until payment in full thereof at the rate then applicable to Base
        Rate
        Loans hereunder.  The determination by Agent of any amount due
        pursuant to this Section, as set forth in a certificate setting forth the
        calculation thereof in reasonable detail, shall, in the absence of manifest
        or
        demonstrable error, be final and conclusive and binding on all of the parties
        hereto.

       

      2.13  LIBOR
        Option.

       

      (a)  Interest
        and Interest Payment Dates.  In lieu of having interest on
        any Advance charged at a rate based upon the Base Rate, Borrower shall have
        the
        option (the “LIBOR Option”) to have interest on all or a portion of the Advances
        be charged (whether at the time when made (unless otherwise provided herein),
        upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation
        of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon
        the
        LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable on the
        earliest of (i) the last day of the Interest Period applicable thereto,
        (provided, however, that, subject to the following clauses (ii) and (iii),
        in
        the case of any Interest Period greater than three (3) months in duration,
        interest shall be payable at three (3) month intervals after the commencement
        of
        the applicable Interest Period and on the last day of such Interest Period),
        (ii) the date on which all or any portion of the Obligations are accelerated
        pursuant to the terms hereof, or (iii) the date on which this Agreement is
        terminated pursuant to the terms hereof.  On the last day of each
        applicable Interest Period, unless Borrower properly has exercised the LIBOR
        Option with respect thereto, the interest rate applicable to such LIBOR Rate
        Loan automatically shall convert to the rate of interest then applicable
        to Base
        Rate Loans of the same type hereunder.  At any time that an Event of
        Default has occurred and is continuing, Borrower no longer shall have the
        option
        to request that Advances bear interest at a rate based upon the LIBOR Rate
        and
        Agent shall have the right to convert the interest rate on all outstanding
        LIBOR
        Rate Loans (other than Term Loan) to the rate then applicable to Base Rate
        Loans
        hereunder.

       

      (b)  LIBOR
        Election.

       

      (i)  Borrower
        may, at any time and from time to time, so long as no Event of Default has
        occurred and is continuing, elect to exercise the LIBOR Option by notifying
        Agent prior to 2:00 p.m. (Georgia time) at least three (3) Business Days
        prior
        to the commencement of the proposed Interest Period (the “LIBOR
        Deadline”).  Notice of Borrower’s election of the LIBOR Option for a
        permitted portion of the Advances and an Interest Period pursuant to this
        Section shall be made by delivery to Agent of a LIBOR Notice received by
        Agent
        before the LIBOR Deadline, or by telephonic notice received by Agent before
        the
        LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received
        by Agent prior to 5:00 p.m. (Georgia time) on the same day).  Promptly
        upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof
        to each of the affected Lenders.

       

      (ii)  Each
        LIBOR Notice shall be irrevocable and binding on Borrower.  In
        connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and
        hold
        Agent and the Lenders harmless against any loss, cost, or expense incurred
        by
        Agent or any Lender as a result of (A) the payment of any principal of any
        LIBOR
        Rate Loan other than on the last day of an Interest Period applicable thereto
        (including as a result of an Event of Default), (B) the conversion of any
        LIBOR
        Rate Loan other than on the last day of the Interest Period applicable thereto,
        or (C) the failure to borrow, convert, continue or prepay any LIBOR Rate
        Loan on
        the date specified in any LIBOR Notice delivered pursuant hereto (such losses,
        costs, or expenses, “Funding Losses”).  Funding Losses shall, with
        respect to Agent or any Lender, be deemed to equal the amount determined
        by
        Agent or such Lender to be the excess, if any, of (1) the amount of interest
        that would have accrued on the principal amount of such LIBOR Rate Loan had
        such
        event not occurred, at the LIBOR Rate that would have been applicable thereto,
        for the period from the date of such event to the last day of the then current
        Interest Period therefor (or, in the case of a failure to borrow, convert,
        or
        continue, for the period that would have been the Interest Period therefor),
        minus (2) the amount of interest that would accrue on such principal
        amount for such period at the interest rate which Agent or such Lender would
        be
        offered were it to be offered, at the commencement of such period, Dollar
        deposits of a comparable amount and period in the London interbank
        market.  A certificate of Agent or a Lender delivered to Borrower
        setting forth any amount or amounts that Agent or such Lender is entitled
        to
        receive pursuant to this Section 2.13 shall be conclusive absent manifest
        error.

       

      
        
          
          

        

        
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      (iii)  Borrower
        shall have not more than five (5) LIBOR Rate Loans in effect at any given
        time,
        of which no more than one LIBOR Rate Loan may be the Term
        Loan.  Borrower only may exercise the LIBOR Option for LIBOR Rate
        Loans of at least One Million Dollars ($1,000,000) and integral multiples
        of Five Hundred Thousand Dollars ($500,000) in excess thereof.

       

      (c)  Conversion.  Borrower
        may convert LIBOR Rate Loans (other than Term Loan) to Base Rate Loans at
        any
        time; provided, however, that in the event that LIBOR Rate Loans are converted
        or prepaid on any date that is not the last day of the Interest Period
        applicable thereto, including as a result of any automatic prepayment through
        the required application by Agent of proceeds of Borrower’s and its
        Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other
        reason, including early termination of the term of this Agreement or
        acceleration of all or any portion of the Obligations pursuant to the terms
        hereof, Borrower shall indemnify, defend, and hold Agent and the Lenders
        and
        their Participants harmless against any and all Funding Losses in accordance
        with Section 2.13 (b)(ii) above.

       

      (d)  Special
        Provisions Applicable to LIBOR Rate.

       

      (i)  The
        LIBOR
        Rate may be adjusted by Agent with respect to any Lender on a prospective
        basis
        to take into account any additional or increased costs to such Lender of
        maintaining or obtaining any eurodollar deposits or increased costs, in each
        case, due to changes in applicable law occurring subsequent to the commencement
        of the then applicable Interest Period, including changes in tax laws (except
        changes in taxes constituting taxes of the type described in clauses (a)
        and (b)
        of the definition of “Excluded Taxes”)) and changes in the reserve requirements
        imposed by the Board of Governors of the Federal Reserve System (or any
        successor), excluding the Reserve Percentage, which additional or increased
        costs would increase the cost of funding or maintaining loans bearing interest
        at the LIBOR Rate.  In any such event, the affected Lender shall give
        Borrower and Agent notice of such a determination and adjustment and Agent
        promptly shall transmit the notice to each other Lender and, upon its receipt
        of
        the notice from the affected Lender, Borrower may, by notice to such affected
        Lender (x) require such Lender to furnish to Borrower a statement setting
        forth
        the basis for adjusting such LIBOR Rate and the method for determining the
        amount of such adjustment, or (y) repay the LIBOR Rate Loans with respect
        to
        which such adjustment is made (together with any amounts due under this Section
        2.13(d)(i).  Failure or delay on the part of any Lender to demand
        compensation pursuant to this Section shall not constitute a waiver of such
        Lender’s right to demand such compensation; provided that Borrower shall not be
        required to compensate a Lender pursuant to this Section for any additional
        or
        increased costs incurred more than one hundred eighty (180) days prior to
        the
        date that such Lender notifies the Borrower of such law giving rise to such
        additional or increased costs and of such Lender’s intention to claim
        compensation therefor; providedfurther that if such claim arises by reason
        of
        the adoption of or change in any law that is retroactive, then the one hundred
        eighty (180) day period day period referred to above shall be extended to
        include the period of retroactive effect thereof.

       

      (ii)  In
        the
        event that any change in market conditions or any law, regulation, treaty,
        or
        directive, or any change therein or in the interpretation of application
        thereof, shall at any time after the date hereof, in the reasonable opinion
        of
        any Lender, make it unlawful or impractical for such Lender to fund or maintain
        LIBOR Rate Loans or to continue such funding or maintaining, or to determine
        or
        charge interest rates at the LIBOR Rate, such Lender shall give notice of
        such
        changed circumstances to Agent and Borrower and Agent promptly shall transmit
        the notice to each other Lender and (y) in the case of any LIBOR Rate Loans
        of
        such Lender that are outstanding, the date specified in such Lender’s notice
        shall be deemed to be the last day of the Interest Period of such LIBOR Rate
        Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall
        accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrower
        shall not be entitled to elect the LIBOR Option until such Lender determines
        that it would no longer be unlawful or impractical to do so.

       

      (e)  No
        Requirement of Matched Funding.  Anything to the contrary
        contained herein notwithstanding, neither Agent, nor any Lender, nor any
        of
        their Participants, is required actually to acquire eurodollar deposits to
        fund
        or otherwise match fund any Obligation as to which interest accrues at the
        LIBOR
        Rate.  The provisions of this Section shall apply as if each Lender or
        its Participants had match funded any Obligation as to which interest is
        accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
        Period in the amount of the LIBOR Rate Loans.

       

      2.14  Capital
        Requirements.  If,
        after the date hereof, any Lender determines that (i) the adoption of or
        change
        in any law, rule, regulation or guideline regarding capital requirements
        for
        banks or bank holding companies, or any change in the interpretation or
        application thereof by any Governmental Authority charged with the
        administration thereof, or (ii) compliance by such Lender or its parent bank
        holding company with any guideline, request, or directive of any such entity
        regarding capital adequacy (whether or not having the force of law), has
        the
        effect of reducing the return on such Lender’s or such holding company’s capital
        as a consequence of such Lender’s Commitments hereunder to a level below that
        which such Lender or such holding company could have achieved but for such
        adoption, change, or compliance (taking into consideration such Lender’s or such
        holding company’s then existing policies with respect to capital adequacy and
        assuming the full utilization of such entity’s capital) by any amount deemed by
        such Lender to be material, then such Lender may notify Borrower and Agent
        thereof.  Following receipt of such notice, Borrower agrees to pay
        such Lender on demand the amount of such reduction of return of capital as
        and
        when such reduction is determined, payable within ninety (90) days after
        presentation by such Lender of a statement in the amount and setting forth
        in
        reasonable detail such Lender’s calculation thereof and the assumptions upon
        which such calculation was based (which statement shall be deemed true and
        correct absent manifest error).  In determining such amount, such
        Lender may use any reasonable averaging and attribution
        methods.  Failure or delay on the part of any Lender to demand
        compensation pursuant to this Section shall not constitute a waiver of such
        Lender’s right to demand such compensation; provided that Borrower shall not be
        required to compensate a Lender pursuant to this Section for any reduction
        in
        return incurred more than one hundred eighty (180) days prior to the date
        that
        such Lender notifies the Borrower of such law, rule, regulation or guideline
        giving rise to such reductions and of such Lender’s intention to claim
        compensation therefor; provided further that if such claim arises by reason
        of
        the adoption of or change in any law, rule, regulation or guideline that
        is
        retroactive, then the one hundred eighty (180) day period referred to above
        shall be extended to include the period of retroactive effect
        thereof.

       

      3.  CONDITIONS;
        TERM OF AGREEMENT.

       

      3.1  Conditions
        Precedent to the Initial Extension of Credit.  The
        obligation of each Lender to make its initial extensions of credit provided
        for
        hereunder, is subject to the fulfillment, to the satisfaction of Agent and
        each
        Lender of each of the conditions precedent set forth on Schedule 3.1 (the
        making
        of such initial extension of credit by a Lender being conclusively deemed
        to be
        its satisfaction or waiver of the conditions precedent ).

       

      
        
          
          

        

        
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      3.2  Conditions
        Precedent to all Extensions of Credit.  The
        obligation of the Lender Group (or any member thereof) to initially make
        the
        Term Loan, any Closing Date Advance and thereafter any future Advances hereunder
        (or to extend any other credit hereunder) at any time shall be subject to
        the
        following conditions precedent:

       

      (a)  the
        representations and warranties of Parent or its Subsidiaries or any Guarantor
        contained in this Agreement or in the other Loan Documents, certificate or
        other
        writing delivered to the Agent or any Lender pursuant hereto or thereto shall
        be
        true and correct in all respects on and as of the date of such extension
        of
        credit, as though made on and as of such date (except to the extent that
        such
        representations and warranties relate solely to an earlier date);

       

      (b)  no
        Default or Event of Default shall have occurred and be continuing on the
        date of
        such extension of credit, nor shall either result from the making
        thereof;

       

      (c)  no
        injunction, writ, restraining order, or other order of any nature restricting
        or
        prohibiting, directly or indirectly, the extending of such credit shall have
        been issued and remain in force by any Governmental Authority against Borrower,
        Agent, or any Lender; and

       

      (d)  no
        Material Adverse Change shall have occurred since December 31,
        2006.

       

      3.3  Term.  This
        Agreement shall continue in full force and effect for a term ending on September
        27, 2011; provided that if, on or prior to such date, the Convertible
        Subordinated Notes are (i) converted, in their entirety, into equity and
        there
        are no cash payment obligations (contingent or otherwise) or future commitments
        outstanding with respect thereto at such time, or (ii) otherwise refinanced
        or
        replaced pursuant to Refinancing Indebtedness with a maturity date not earlier
        than June 27, 2013, the term of this Agreement shall end on December 27,
        2012
        (the “Maturity Date”).  The foregoing notwithstanding, the Lender
        Group, upon the election of the Required Lenders, shall have the right to
        terminate its obligations under this Agreement immediately and without notice
        upon the occurrence and during the continuation of an Event of
        Default.

       

      3.4  Effect
        of Termination.  On
        the date of termination of this Agreement, all Obligations (including contingent
        reimbursement obligations of Borrower with respect to outstanding Letters
        of
        Credit and including all Bank Product Obligations) immediately shall become
        due
        and payable without notice or demand (including the requirement that Borrower
        provide (a) Letter of Credit Collateralization, and (b) Bank Product
        Collateralization).  No termination of this Agreement, however, shall
        relieve or discharge Borrower or its Subsidiaries of their duties, Obligations,
        or covenants hereunder or under any other Loan Document and Agent’s Liens in the
        Collateral shall remain in effect until all Obligations have been paid in
        full
        and the Lender Group’s obligations to provide additional credit hereunder have
        been terminated.  When this Agreement has been terminated and all of
        the Obligations have been paid in full and the Lender Group’s obligations to
        provide additional credit under the Loan Documents have been terminated
        irrevocably, Agent will, at Borrower’s sole expense, without recourse,
        representation or warranty, execute and deliver any payoff letters, termination
        statements, lien releases, mortgage releases, re-assignments of trademarks,
        discharges of security interests, and other similar discharge or release
        documents (and, if applicable, in recordable form) as are reasonably necessary
        to release, as of record, Agent’s Liens and all notices of security interests
        and liens previously filed by Agent with respect to the
        Obligations.  Any remaining cash collateral relating to Letter of
        Credit Usage and Bank Product Obligations and any back up letter of credit
        with
        an undrawn amount shall be returned to Borrower (a) in the case of any Letter
        of
        Credit surrendered for termination, no later than ten (10) Business Days
        following such surrender to Agent or the Issuing Lender of such Letters of
        Credit, (b) in the case of any Letter of Credit that expires, no later than
        thirty (30) days of the expiration of such Letters of Credit, and (c) in
        the
        case of the Bank Product Reserve, no later than ten (10) Business Days following
        the termination of the Bank Product Obligations.

       

      3.5  Early
        Termination by Borrower.  Borrower
        has the option, at any time upon ten (10) Business Days’ prior written notice to
        Agent, to terminate this Agreement and terminate the Commitments hereunder
        by
        paying to Agent, in cash, the Obligations (including (a) providing Letter
        of
        Credit Collateralization with respect to the then existing Letter of Credit
        Usage and (b) providing Bank Product Collateralization with respect to the
        then
        existing Bank Products), in full.  If Borrower has sent a notice of
        termination pursuant to the provisions of this Section, then, unless otherwise
        agreed by the Agent, the Commitments shall terminate and Borrower shall be
        obligated to repay the Obligations (including (a) providing Letter of Credit
        Collateralization with respect to the then existing Letter of Credit Usage
        and
        (b) providing Bank Product Collateralization with respect to the then existing
        Bank Products), in full on the date set forth as the date of termination of
        this Agreement in such notice.

       

      4.  REPRESENTATIONS
        AND WARRANTIES.

       

      In
        order
        to induce the Lender Group to enter into this Agreement, Borrower makes the
        following representations and warranties to the Lender Group which shall
        be
        true, correct, and complete, in all respects, as of the date hereof, and
        at and
        as of the date of the making of each Advance (or other extension of credit)
        made
        thereafter, as though made on and as of the date of such Advance (or other
        extension of credit) (except to the extent that such representations and
        warranties relate solely to an earlier date which shall have been true, correct
        and complete as of such earlier date) and such representations and
        warranties shall survive the execution and delivery of this
        Agreement:

       

      4.1  No
        Encumbrances.  Schedule
        4.1 (as updated from time to time) sets forth all Real Property (other than
        Oil
        and Gas Properties) owned, leased, subleased or used by Parent or any of
        its
        Subsidiaries. Parent and its Subsidiaries have good and
        indefeasible title to, or a valid leasehold interest in, their personal property
        assets and good and marketable title to, or a valid leasehold interest in,
        their
        Real Property (other than Oil and Gas Properties), in each case, free and
        clear
        of Liens except for Permitted Liens.  Schedule 4.1 (as updated from
        time to time) also describes any purchase options, rights of first refusal
        or
        other similar contractual rights in favor of any Parent or any of its
        Subsidiaries pertaining to any Real Property (other than Oil and Gas Properties)
        owned or leased by Parent or any of its Subsidiaries.  As of the
        Closing Date, no portion of any Real Property (other than Oil and Gas
        Properties) has suffered any material damage by fire or other casualty loss
        which has not heretofore been repaired and restored in all material respects
        to
        its original condition or otherwise remedied.  Except as could not
        reasonably be expected to cause a Material Adverse Change, all permits required
        to have been issued or appropriate to enable the Real Property (other than
        Oil
        and Gas Properties) to be lawfully occupied and used for all of the purposes
        for
        which they are currently occupied and used have been lawfully issued and
        are in
        full force and effect in all respects.

       

      
        
          
          

        

        
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      4.2  Margin
        Stock.  No
        Loan Party nor any Subsidiary of a Loan Party is engaged, nor will it engage,
        principally or as one of its important activities, in the business of extending
        credit for the purpose of “purchasing” or “carrying” any “margin security” as
        such terms are defined in Regulation U of the Federal Reserve Board as now
        and
        from time to time hereafter in effect (such securities being referred to
        herein
        as “Margin Stock”).  No Loan Party nor any Subsidiary of a Loan Party
        owns any Margin Stock, and none of the proceeds of the Term Loan, Advances
        or
        other extensions of credit under this Agreement will be used, directly or
        indirectly, for the purpose of purchasing or carrying any Margin Stock, for
        the
        purpose of reducing or retiring any Indebtedness which was originally incurred
        to purchase or carry any Margin Stock or for any other purpose which might
        cause
        any of the Term Loan, Advances or other extensions of credit under this
        Agreement to be considered a “purpose credit” within the meaning of Regulation
        T, U or X of the Federal Reserve Board.

       

      4.3  Brokers.  No
        broker or finder acting on behalf of any Loan Party brought about the obtaining,
        making or closing of the Loans and no Loan Party has any obligation to any
        Person in respect of any finder’s or brokerage fees in connection
        therewith.

       

      4.4  Jurisdiction
        of Organization; Location of Chief Executive Office; Organizational
        Identification Number; Commercial Tort Claims. 

       

      (a)  The
        name
        of (within the meaning of Section 9-503 of the Code) and jurisdiction of
        organization of Parent and each of its Subsidiaries is set forth on
        Schedule 4.4(a) or as otherwise notified to the Agent pursuant to and as
        permitted by Section 6.5.

       

      (b)  The
        chief
        executive office of Parent and each of its Subsidiaries is located at the
        address indicated on Schedule 4.4(b) or as otherwise notified to the Agent
        pursuant to and as permitted by Section 6.5.

       

      (c)  Parent’s
        and each of its Subsidiaries’ tax identification numbers and organizational
        identification numbers, if any, are identified on Schedule 4.4(c) or as
        otherwise notified to the Agent pursuant to and as permitted by Section
        6.5.

       

      (d)  As
        of the
        Closing Date, neither Borrower nor any of its Subsidiaries holds any commercial
        tort claims, except as set forth on Schedule 4.4(d).

       

      4.5  Due
        Organization and Qualification; Compliance with Laws;
        Subsidiaries. 

       

      (a)  Borrower
        is duly organized and existing and in good standing under the laws of the
        jurisdiction of its organization and qualified to do business in any state
        where
        the failure to be so qualified reasonably could be expected to result in
        a
        Material Adverse Change.

       

      (b)  Set
        forth
        on Schedule 4.5(b), is a complete and accurate description of the authorized
        capital Stock of Parent, by class, as of the Closing Date, and a description
        of
        the number of shares of each such class that are issued and outstanding as
        of
        the Closing Date.  As of the Closing Date, other than relating to the
        Convertible Subordinated Notes and other than as described on Schedule 4.5(b),
        there are no subscriptions, options, warrants, or calls relating to any shares
        of Parent’s capital Stock, including any right of conversion or exchange under
        any outstanding security or other instrument.  Other than relating to
        the Convertible Subordinated Notes and other than as described on Schedule
        4.5(b), Parent is not subject to any obligation (contingent or otherwise)
        to
        repurchase or otherwise acquire or retire any shares of its capital Stock
        or any
        security convertible into or exchangeable for any of its capital
        Stock.

       

      (c)  Set
        forth
        on Schedule 4.5(c), is a complete and accurate description of the authorized
        capital Stock of Borrower, by class, and a description of the number of shares
        of each such class that are issued and outstanding.  There are no
        subscriptions, options, warrants, or calls relating to any shares of Borrower’s
        capital Stock, including any right of conversion or exchange under any
        outstanding security or other instrument.  Borrower is not subject to
        any obligation (contingent or otherwise) to repurchase or otherwise acquire
        or
        retire any shares of its capital Stock or any security convertible into or
        exchangeable for any of its capital Stock. Set forth on Schedule 4.5(c) or
        as otherwise notified to the Agent pursuant to Section 5.15, is a complete
        and
        accurate list of Borrower’s direct and indirect Subsidiaries, showing: (i) the
        jurisdiction of their organization, (ii) the number of shares of each class
        of
        common and preferred Stock authorized for each of such Subsidiaries, and
        (iii)
        the number and the percentage of the outstanding shares of each such class
        owned
        directly or indirectly by Borrower.  Borrower has no joint ventures or
        similar arrangements with any Person. All of the outstanding capital Stock
        of
        each such Subsidiary has been validly issued and is fully paid and
        non-assessable.

       

      (d)  Except
        as
        set forth on Schedule 4.5(d), there are no subscriptions, options,
        warrants, or calls relating to any shares of Borrower’s Subsidiaries’ capital
        Stock, including any right of conversion or exchange under any outstanding
        security or other instrument.  Neither Borrower nor any of its
        Subsidiaries is subject to any obligation (contingent or otherwise) to
        repurchase or otherwise acquire or retire any shares of Borrower’s Subsidiaries’
capital Stock or any security convertible into or exchangeable for any such
        capital Stock.

       

      (e)  (i)       Neither
        Parent nor any Subsidiary of Parent is in violation of any law, statute,
        regulation, ordinance, judgment, order, or decree applicable to it (other
        than Environmental Law which is addressed in Section 4.11 below), which
        violation could reasonably be expected to cause a Material Adverse
        Change.

       

      
        
          
          

        

        
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      (ii)       Neither
        Parent nor any of its Subsidiaries has violated any law in any respect or
        failed
        to obtain any license, permit, franchise or other authorization from any
        Governmental Authority (other than pursuant to any Environmental Law which
        is
        addressed in Section 4.11 below) necessary for the ownership of any of its
        Oil
        and Gas Properties or the conduct of its business which failure could not
        reasonably be expected to cause a Material Adverse Change.  Except as
        could not reasonably be expected to cause a Material Adverse Change, the
        Oil and
        Gas Properties of Parent and its Subsidiaries (and assets and properties
        utilized therewith) have been maintained, operated and developed in a good
        and
        workmanlike manner and in conformity with all applicable laws and all rules,
        regulations and orders of all Governmental Authorities having jurisdiction
        (other than pursuant to any Environmental Law which is addressed in Section
        4.11
        below) and in conformity with the provisions of all leases, subleases or
        other
        contracts comprising a part of the Hydrocarbon Interests and other contracts
        and
        agreements forming a part of such Oil and Gas Properties; specifically in
        this
        connection, (A) no Oil and Gas Property of Parent (or any of its Subsidiaries)
        is subject to having allowable production reduced below the full and regular
        allowable production (including the maximum permissible tolerance) because
        of
        any overproduction (whether or not the same was permissible at the time)
        prior
        to the Closing Date and (B) none of the wells comprising a part of any Oil
        and
        Gas Property (or assets and properties utilized therewith) is deviated from
        the
        vertical, except to the extent such deviation could not reasonably be expected
        to result in a Material Adverse Change, and such wells are, in fact, bottomed
        under and are producing from, and the well bores are wholly within, such
        Oil and
        Gas Properties (or in the case of wells located on Real Property utilized
        therewith, such utilized Real Property) covered by the leases.

       

      4.6  Due
        Authorization; No Conflict.

       

      (a)  The
        execution, delivery, and performance by Borrower of this Agreement and the
        Loan
        Documents to which it is a party have been duly authorized by all necessary
        action on the part of Borrower and Borrower has full power and authority
        to own
        and hold under lease its property and to conduct its business substantially
        as
        currently conducted by it.

       

      (b)  The
        execution, delivery, and performance by Borrower of this Agreement and the
        other
        Loan Documents to which it is a party do not and will not (i) violate any
        provision of federal, state, or local law or regulation applicable to Borrower,
        the Governing Documents of Borrower, or any order, judgment, or decree of
        any
        court or other Governmental Authority binding on Borrower, (ii) conflict
        with,
        result in a breach of, or constitute (with due notice or lapse of time or
        both)
        a default under any Material Contract of Borrower or require any approval
        or
        consent of any Person under any Material Contract of Borrower, other than
        consents or approvals that have been obtained and that are still in force
        and
        effect, (iii) result in or require the creation or imposition of any Lien
        of any
        nature whatsoever upon any properties or assets of Borrower, other than
        Permitted Liens, or (iv) require any approval of Borrower’s interest holders,
        other than approvals that have been obtained and that are still in force
        and
        effect.

       

      (c)  Except
        as
        set forth on Schedule 4.6, and other than the filing of financing statements,
        the recordation of the Mortgages, and other filings or actions necessary
        to
        perfect Liens granted to Agent in the Collateral, the execution, delivery,
        and
        performance by Borrower of this Agreement and the other Loan Documents to
        which
        Borrower is a party do not and will not require any registration with, consent,
        or approval of, or notice to, or other action with or by, any Governmental
        Authority, other than consents or approvals that have been obtained and that
        are
        still in force and effect and the necessary filings, notices and recording
        of
        Mortgages and other actions necessary to reflect the Liens granted to the
        Agent
        in the Collateral.

       

      (d)  This
        Agreement and the other Loan Documents to which Borrower is a party, and
        all
        other documents contemplated hereby and thereby, when executed and delivered
        by
        Borrower will be the legally valid and binding obligations of Borrower,
        enforceable against Borrower in accordance with their respective terms, except
        as enforcement may be limited by equitable principles or by bankruptcy,
        insolvency, reorganization, moratorium, or similar laws relating to or limiting
        creditors’ rights generally.

       

      (e)  Agent’s
        Liens on all of the assets of the Loan Parties, including the Oil and Gas
        Properties (other than the Oil and Gas Properties that are not expressly
        required to be mortgaged under the terms of this Agreement and the other
        Loan
        Documents), are validly created, perfected (other than any Deposit Accounts
        and
        Securities Accounts not subject to a Control Agreement as permitted by Section
        6.12, and subject only to the filing of financing statements and the recordation
        of the Mortgages), and first priority Liens, subject only to Permitted
        Liens.

       

      (f)  The
        execution, delivery, and performance by each Guarantor of the Loan Documents
        to
        which it is a party have been duly authorized by all necessary action on
        the
        part of such Guarantor and each Guarantor has full power and authority to
        own
        and hold under lease its property and to conduct its business substantially
        as
        currently conducted by it.

       

      (g)  The
        execution, delivery, and performance by each Guarantor of the Loan Documents
        to
        which it is a party do not and will not (i) violate any provision of federal,
        state, or local law or regulation applicable to such Guarantor, the Governing
        Documents of such Guarantor, or any order, judgment, or decree of any court
        or
        other Governmental Authority binding on such Guarantor, (ii) conflict with,
        result in a breach of, or constitute (with due notice or lapse of time or
        both)
        a default under any Material Contract of such Guarantor or require any
        approval or consent of any Person under any Material Contract of such Guarantor,
        other than consents or approvals that have been obtained and that are still
        in
        force and effect, (iii) result in or require the creation or imposition of
        any
        Lien of any nature whatsoever upon any properties or assets of such Guarantor,
        other than Permitted Liens, or (iv) require any approval of such Guarantor’s
        interest holders other than approvals that have been obtained and that are
        still in force and effect.

       

      (h)  Other
        than the filing of financing statements, the recordation of the Mortgages,
        and
        other filings or actions necessary to perfect Liens granted to Agent in the
        Collateral, the execution, delivery, and performance by each Guarantor of
        the
        Loan Documents to which such Guarantor is a party do not and will not require
        any registration with, consent, or approval of, or notice to, or other action
        with or by, any Governmental Authority, other than as expressly contemplated
        by
        the Loan Documents, and consents or approvals that have been obtained and
        that
        are still in force and effect.

       

      (i)  The
        Loan
        Documents to which each Guarantor is a party, and all other documents
        contemplated hereby and thereby, when executed and delivered by such Guarantor
        will be the legally valid and binding obligations of such Guarantor, enforceable
        against such Guarantor in accordance with their respective terms, except
        as
        enforcement may be limited by equitable principles or by bankruptcy, insolvency,
        reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.

       

      
        
          
          

        

        
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      (j)  No
        Default or Event of Default exists.

       

      4.7  Litigation.  Other
        than those matters disclosed on Schedule 4.7 and other than matters arising
        after the Closing Date that reasonably could not be expected to result in
        a
        Material Adverse Change, there are no actions, suits, or proceedings pending
        or,
        to the best knowledge of Borrower, threatened against Borrower or any of
        its
        Subsidiaries.

       

      4.8  No
        Material Adverse Change.

       

      (a)  All
        of
        Parent’s consolidated financial statements that have been delivered by Borrower
        to the Lender Group have been prepared in accordance with GAAP (except, in
        the
        case of unaudited financial statements, for the lack of footnotes and being
        subject to year-end audit adjustments) and present fairly in all material
        respects, the Parent’s and its consolidated Subsidiaries’ financial condition as
        of the date thereof and results of operations for the period then
        ended.  Since the date of the most recent financial statements
        included in Parent’s reports filed with the SEC on Form 10-K and 10-Q, as
        applicable, there has not been a Material Adverse Change.

       

      (b)  The
        Projections, including any Projections delivered on or before the Closing
        Date,
        when submitted to Agent as required pursuant to the Loan Documents represent
        Parent’s and Borrower’s good faith estimate of the future financial performance
        of Parent and its consolidated Subsidiaries for the periods set forth
        therein.  The Projections have been prepared on the basis of the
        assumptions set forth therein, which Parent and Borrower believe were fair
        and reasonable in light of current and reasonably foreseeable business
        conditions at the time submitted to Agent.

       

      4.9  Fraudulent
        Transfer.

       

      (a)  Each
        of
        Parent and each of its Subsidiaries is Solvent.

       

      (b)  No
        transfer of property is being made by Parent or its Subsidiaries and no
        obligation is being incurred by Parent or its Subsidiaries in connection
        with
        the transactions contemplated by this Agreement or the other Loan Documents
        with
        the intent to hinder, delay, or defraud either present or future creditors
        of
        Parent or its Subsidiaries.

       

      4.10  Employee
        Benefits.  None
        of Parent, any of its Subsidiaries, or any of their ERISA Affiliates maintains
        or contributes to any Pension Plan, Multiemployer Plan or other Benefit
        Plan.

       

      4.11  Environmental
        Condition.  Except
        as set forth on Schedule 4.11, or after the date of this Agreement, otherwise
        disclosed in writing, pursuant to Section 5.12, by Parent or Borrower to
        the
        Agent, and except as would not reasonably be expected to cause a Material
        Adverse Change.

       

      (a)  Parent,
        its Subsidiaries and their businesses and operations, including such businesses
        and operations at any Real Property and any former business and operations
        at
        real property formerly owned, leased, operated, managed, or occupied by Parent,
        its Subsidiaries or any of their predecessors in interest (the “Former Real
        Property”) are and have been in compliance with, and none of Parent nor any of
        its Subsidiaries has liability under, any applicable Environmental
        Laws;

       

      (b)  Parent
        and its Subsidiaries have obtained all permits required for the conduct of
        their
        business and operations, and the ownership, operation and use of the Real
        Property, under all applicable Environmental Laws (the “Environmental
        Permits”).  Parent and its Subsidiaries are in compliance with the
        terms and conditions of such Environmental Permits, and all such Environmental
        Permits are valid and in good standing.  No expenditures or
        operational adjustments, other than those in the ordinary course of business,
        are reasonably anticipated to be required to remain in compliance with the
        terms
        and conditions of, or to renew or modify such Environmental
        Permits;

       

      (c)  There
        has
        been no Release or threatened Release or any handling, management, generation,
        treatment, storage or disposal of Hazardous Materials on, at, under or from
        any
        Real Property or Former Real Property that has resulted in, or is reasonably
        likely to result in, a material Environmental Liability for Parent or any
        of its
        Subsidiaries;

       

      (d)  There
        is
        no Environmental Action or Environmental Liability pending or, to the knowledge
        of Parent or its Subsidiaries, threatened against Parent or its Subsidiaries,
        or
        relating to the operations of Parent or its Subsidiaries, and, to the knowledge
        of Parent or its Subsidiaries, there are no actions, activities, circumstances,
        conditions, events or incidents that are reasonably likely to form the basis
        of
        such an Environmental Action or Environmental Liability against Parent or
        any of
        its Subsidiaries, including with respect to operations at any Real Property
        and
        former operations at any Former Real Property;

       

      (e)  To
        the
        knowledge of Parent and its Subsidiaries, no person with an indemnity,
        contribution or other obligation to any of Parent or its Subsidiaries relating
        to compliance with or liability under Environmental Law is in default with
        respect to any such indemnity, contribution or other obligation;

       

      (f)  None
        of
        Parent or its Subsidiaries is conducting, financing or is obligated to perform
        any Response Action or otherwise incur any expense under Environmental Law
        pursuant to any Environmental Action or agreement by which it is bound or
        has
        expressly assumed by contract or agreement;

       

      
        
          
          

        

        
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      (g)  No
        Real
        Property or facility owned, operated or leased by Parent or its Subsidiaries
        and, to the knowledge of Parent or its Subsidiaries, no Former Real Property
        is
        (i) listed or proposed for listing on the National Priorities List as defined
        in
        and promulgated pursuant to the Comprehensive Environmental Response,
        Compensation and Liability Act, 42 U.S.C. §9601 et seq. (“CERCLA”) or (ii)
        included on any similar list maintained by any Governmental Authority that
        indicates that any Parent or Subsidiary has or may have an obligation to
        undertake any Response Action;

       

      (h)  No
        Environmental Lien has been recorded with respect to any owned Real Estate
        Property or, to the knowledge of Parent or any of its Subsidiaries, with
        respect
        to any facility leased or operated by Parent or its Subsidiaries, and to
        the
        knowledge of Parent and its Subsidiaries, no Environmental Lien has been
        threatened with respect to any Real Property;

       

      (i)  Parent
        or
        its Subsidiaries have made available to the Lenders all records and files
        in the
        possession, custody or control of, or otherwise reasonably available to,
        Parent
        or its Subsidiaries concerning compliance with or liability or obligation
        under
        Environmental Law, including those concerning the environmental condition
        of the
        Real Property or the existence of Hazardous Materials at the Real Property
        or
        Former Real Property; and

       

      (j)  The
        representations and warranties set forth in this Section 4.11 shall be the
        sole
        representations and warranties of Parent and its Subsidiaries under the Loan
        Documents relating to environmental matters.

       

      4.12  Intellectual
        Property.  Except
        with respect to Seismic Licenses, Parent and its Subsidiaries own, or hold
        licenses in, all trademarks, trade names, copyrights, patents, patent rights,
        and licenses that are necessary to the conduct of its business as currently
        conducted, and attached hereto as Schedule 4.12 (as updated from time to
        time)
        is a true, correct, and complete listing of all material patents, patent
        applications, trademarks, trademark applications, copyrights, and copyright
        registrations as to which Parent or one of its Subsidiaries is the owner
        or is
        an exclusive licensee; provided, however, that Borrower may amend Schedule 4.12
        to add additional property so long as such amendment occurs by written notice
        to
        Agent not less than 10 days after the date on which Parent or any Subsidiary
        of
        Parent acquires any such property after the Closing Date.

       

      4.13  Leases.
         Parent and its Subsidiaries enjoy peaceful and
        undisturbed possession under all leases covering any Proved Oil and Gas Property
        and any other Real Property material to their business and to which they
        are
        parties or under which they are operating, and all of such leases are valid
        and
        subsisting and no material default by Parent or its Subsidiaries exists under
        any of them.  Except as set forth on Schedule 4.13, there are no
        leases, subleases, contracts or other operating agreements that allocate
        operating expenses to Parent or any of its Subsidiaries in excess of its
        working
        interest as reflected in the most recent Reserve Report in the particular
        Oil
        and Gas Property subject to such lease, the sublease, contract or other
        operating agreement.

       

      4.14  Deposit
        Accounts and Securities Accounts.  Set
        forth on Schedule 4.14 is a listing of all of Parent’s and its Subsidiaries’
Deposit Accounts and Securities Accounts, including, with respect to each
        bank
        or securities intermediary (a) the name and address of such Person, and (b)
        the
        account numbers of the Deposit Accounts or Securities Accounts maintained
        with
        such Person.  So long as no Default or Event of Default has occurred
        and is continuing, Borrower may amend Schedule 4.14 to add or replace a Deposit
        Account or Securities Account; provided, however, that (i) such prospective
        bank
        or securities intermediary shall be reasonably satisfactory to Agent, and
        (ii)
        prior to the time of the opening of such Deposit Account or Securities Account,
        Parent (or its Subsidiary, as applicable) and such prospective bank or
        securities intermediary shall have executed and delivered to Agent a Control
        Agreement.

       

      4.15  Complete
        Disclosure.  None
        of the factual information (taken as a whole) furnished by or on behalf of
        Parent or its Subsidiaries in writing to Agent or any Lender (including all
        information contained in the Schedules hereto or in the other Loan Documents)
        for purposes of or in connection with this Agreement, the other Loan Documents,
        or any transaction contemplated herein or therein contains, and none of the
        other factual information (taken as a whole) hereafter furnished by or on
        behalf
        of Parent or its Subsidiaries in writing to Agent or any Lender will contain,
        any material misstatement of fact or omits, or will omit, to state any fact
        necessary to make such information not misleading in any material respect
        at
        such time in light of the circumstances under which such information was
        provided, it being understood that the factual information referenced in
        this
        sentence shall not include the Projections or other forecasts or forward
        looking
        statements provided to the Agent or the Lender Group.  On the Closing
        Date, the Projections provided represent, and as of the date on which any
        other
        projections are delivered to Agent, such additional projections represent,
        Borrower’s good faith estimate of its and its Subsidiaries future performance
        for the periods covered thereby based upon assumptions believed by Borrower
        to
        be reasonable at the time of the delivery thereof to Agent (it being understood
        that such projections and forecasts are subject to uncertainties and
        contingencies, many of which are beyond the control of Borrower and its
        Subsidiaries and no assurances can be given that such projections or forecasts
        will be realized and further understood that projections concerning reserves
        or
        production volumes attributable to the Oil and Gas Properties and production
        and
        cost estimates contained in the projections are necessarily based upon
        professional opinions, estimates and projections and that Borrower and the
        Subsidiaries do not warrant that such opinions, estimates and projections
        will
        ultimately prove to have been accurate, provided that all such projections
        shall
        be prepared in good faith based upon assumptions believed by Borrower to
        be
        reasonable at the time of the delivery thereof to Agent and consistent with
        industry standards).

       

      4.16  Indebtedness.  Set
        forth on Schedule 4.16 is a true and complete list of all Indebtedness of
        Parent
        and its Subsidiaries outstanding immediately prior to the Closing Date that
        is
        to remain outstanding after the Closing Date and such Schedule accurately
        sets
        forth the aggregate principal amount of such Indebtedness as of the Closing
        Date.

       

      4.17  Material
        Contracts.  As
        of the Closing Date, set forth on Schedule 4.17 is a list of all Material
        Contracts of Parent and its Subsidiaries.  Borrower has complied with
        its obligations pursuant to Section 5.17. Except for matters which, either
        individually or in the aggregate, could not reasonably be expected to result
        in
        a Material Adverse Change, each Material Contract (other than those that
        have
        expired at the end of their normal terms) (a) is in full force and effect,
        and
        is binding upon and enforceable against Parent or its Subsidiary, as applicable,
        and, to the Borrower’s knowledge, each other Person that is a party thereto in
        accordance with its terms, (b) has not been otherwise amended or modified
        (other
        than amendments or modifications permitted by Section 6.7(c)) and (c) is
        not in
        default due to the action or inaction of Parent or any of its
        Subsidiaries.

       

      
        
          
          

        

        
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      4.18  Government
        Regulation.  Neither
        Parent nor any Subsidiary of Parent is an “investment company” or an “affiliated
        person” of, or “promoter” or “principal underwriter” for, an “investment
        company,” as such terms are defined in the Investment Company Act of 1940 as
        amended.  Neither Parent nor any Subsidiary of Parent is subject to
        regulation under the Public Utility Holding Company Act of 2005, the Federal
        Power Act, or any other federal or state statute that restricts or limits
        its
        ability to incur Indebtedness or to perform its obligations hereunder. The
        Advances and the other transactions contemplated hereunder, the application
        of
        the proceeds thereof and repayment thereof comply in all material respects
        with
        any such statute or any rule, regulation or order issued by the
        SEC.

       

      4.19  Foreign
        Assets Control Regulations, Etc.

       

      (a)  Neither
        Parent nor any Subsidiary of Parent is in violation in any material respect
        of
        the Trading with the Enemy Act, as amended, or any of the foreign assets
        control
        regulations of the United States Treasury Department (31 CFR, Subtitle B,
        Chapter V, as amended) or any enabling legislation or executive order relating
        thereto.

       

      (b)   Neither
        Parent nor any of its respective Subsidiaries (i) is, or will become, a Person
        described or designated in the Specially Designated Nationals and Blocked
        Persons List of the Office of Foreign Assets Control or in Section 1 of the
        Anti-Terrorism Order or (ii) engages or will engage in any dealings or
        transactions, or is or will be otherwise associated, with any such
        Person.  Parent and its Subsidiaries are in compliance, in all
        material respects, with the USA Patriot Act. 

       

      (c)  No
        part
        of the proceeds from the loans made hereunder will be used by Borrower, directly
        or indirectly, for any payments to any governmental official or employee,
        political party, official of a political party, candidate for political office,
        or anyone else acting in an official capacity, in order to obtain, retain
        or
        direct business or obtain any improper advantage, in violation of the United
        States Foreign Corrupt Practices Act of 1977, as amended.

       

      4.20  Insurance
        and Bonds.  Schedule
        4.20 lists, as of the Closing Date, all insurance policies of any nature
        maintained for current occurrences by Borrower and each Guarantor, as well
        as a
        summary of the terms of each such policy.  Neither Borrower nor any
        Guarantor is in default of any obligation under any such
        policy.  Except as set forth on Schedule 4.20, all such policies are
        in full force and effect, all premiums with respect thereto covering all
        periods
        up to and including the Closing Date have been paid, and no notice of
        cancellation or termination has been received with respect to any such
        policy.  Schedule 4.20 contains an accurate and complete description,
        as of the Closing Date, of all performance bonds related to operations on
        or
        pertaining to the Oil and Gas Properties of Parent and its Subsidiaries.
        Such
        bonds and insurance policies comply with all requirements of law and all
        agreements to which Parent and each of its Subsidiaries is a party, except
        to
        the extent that such noncompliance can not reasonably be expected to cause
        a
        Material Adverse Change; are valid, outstanding and enforceable policies;
        provide adequate coverage in at least such amounts and against at least such
        risks (but including in any event public liability) as are required by
        Governmental Authorities and/or usually insured or bonded against in the
        same
        general area by companies engaged in the same or a similar business for the
        assets and operations of Parent and its Subsidiaries in the same or similar
        locations; will remain in full force and effect through the respective dates
        set
        forth in Schedule 4.20 without the payment of additional premiums except
        as set
        forth on Schedule 4.20; and will not in any way be affected by, or terminate
        or
        lapse by reason of, the transactions contemplated by this
        Agreement.  Neither Parent nor any Subsidiary has been refused any
        bonds or insurance with respect to its assets or operations, nor has its
        coverage been limited below usual and customary bond or policy limits, by
        any
        bonding company or insurance carrier to which it has applied for any such
        bond
        or insurance or with which it has carried insurance during the three years
        prior
        to the Closing Date.  To the extent any insurance policy has a cash
        surrender, rebate or similar value, there is no restriction, Lien or other
        encumbrance affecting any of Parent’s or its Subsidiaries receipt or claim of
        such value, and no obligation or agreement to pay, directly or indirectly,
        such
        value to any other party exists other in favor of the Lenders.

       

      4.21  Government
        Contracts.  Except
        as set forth in Schedule 4.21 and other than leases and other agreements
        (but
        not excluding agreements pursuant to which or by which receivables are created
        in favor of any Loan Party) relating to Oil and Gas Properties, neither Parent
        nor any of its Subsidiaries is a party to any contract or agreement with
        any
        Governmental Authority and neither Parent’s nor any Subsidiary’s Accounts are
        subject to the Federal Assignment of Claims Act, as amended  (31
        U.S.C. Section 3727).

       

      4.22  Taxes.  All
        tax returns, reports and statements, including information returns, required
        by
        any Governmental Authority to be filed by Parent and its Subsidiaries have
        been
        filed with the appropriate Governmental Authority (and all such returns,
        reports
        and statements accurately reflect in all material respects all liabilities
        of
        each respective Parent and its Subsidiaries for the periods covered thereby)
        and
        all charges have been paid prior to the date on which any material fine,
        penalty, interest or late charge may be added thereto for nonpayment thereof
        (or
        any such fine, penalty, interest, late charge or loss has been paid), excluding
        charges or other amounts that are subject to a Permitted
        Protest.  Proper and accurate amounts have been withheld by Parent and
        its Subsidiaries from its respective employees for all periods in full and
        complete compliance with all applicable federal, state, local and foreign
        law
        and such withholdings have been timely paid to the respective Governmental
        Authorities.  Schedule 4.22 sets forth as of the Closing Date those
        taxable years for which Parent’s and its Subsidiaries’ tax returns are currently
        being audited by the IRS or any other applicable Governmental Authority and
        any
        assessments or threatened assessments in connection with such audit, or
        otherwise currently outstanding.  As of the Closing Date and except as
        set forth on Schedule 4.22, there is no action, suit, proceeding, investigation,
        audit or claim now pending or threatened by any authority regarding any taxes
        relating to Parent or its Subsidiaries, which, either individually or in
        the
        aggregate, could reasonably be expected to cause a Material Adverse Change
        or to
        result in a material liability to Parent or its Subsidiaries.  Except
        as described on Schedule 4.22, neither Parent nor any of its Subsidiaries
        has
        executed or filed with the IRS or any other Governmental Authority any agreement
        or other document extending, or having the effect of extending, the period
        for
        assessment or collection of any charges or other amounts.  None of
        Parent or its Subsidiaries and their respective predecessors (or to Borrower’s
        knowledge, as a transferee) are liable for any charges or other amounts under
        any tax agreement (including any tax sharing agreements).  As of the
        Closing Date, neither Parent nor its Subsidiaries has agreed or been requested
        to make any adjustment under IRC Section 481(a), by reason of a change in
        accounting method or otherwise, which could cause a Material Adverse
        Change.

       

      4.23  Gas,
        Imbalances, Prepayments.  As
        of the date hereof, except as set forth on Schedule 4.23 or on the most recent
        certificate delivered pursuant to Section 5.20(c), on a net basis there are
        no
        gas imbalances, take or pay or other similar arrangements or any prepayment
        with
        respect to any of the Oil and Gas Properties of Parent or any of its
        Subsidiaries, which would require such Person either to make cash settlements
        for such production or require Parent or any of its Subsidiaries to deliver
        Hydrocarbons produced from the Oil and Gas Properties at some future time
        in any
        case without then or thereafter receiving full payment therefor exceeding
        the
        amount permitted pursuant to Section 6.17.

      
        
          
          

        

        
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      4.24  Swap
        Agreements.  Schedule
        4.24 sets forth, as of the Closing Date, a true and complete list of all
        Swap
        Agreements (including any commodity price swap agreements, forward agreements
        or
        contracts of sale which provide for prepayment for deferred shipment or delivery
        of Hydrocarbons or other commodities) of Parent and its Subsidiaries, the
        material terms thereof (including the type, term, effective date, termination
        date and notional amounts or volumes), all credit support agreements relating
        thereto (including any margin required or supplied), and the counterparty
        to
        each such agreement.

       

      4.25  Location
        of Real Property and Leased Premises.

       

      (a)  Schedule
        4.25 lists completely and correctly as of the Closing Date all material Oil
        and
        Gas Properties that are Real Property whether leased or owned by Parent (and
        its
        Subsidiaries, as applicable) and the lands covered or respective addresses
        (if
        any), as applicable, counties and states thereof.

       

      (b)  Parent
        (and each of its Subsidiaries) has Defensible Title to all of its Proved
        Oil and
        Gas Properties set forth on Schedule 4.25 which constitute Real Property
        and
        good and indefeasible title to all of its Proved Oil and Gas Properties which
        constitute personal property, except for (i) such imperfections of title
        which do not in the aggregate materially detract from the value thereof to,
        or
        the use thereof in, the business of Parent (or its Subsidiaries, as applicable)
        and (ii) Permitted Liens.  The quantum and nature of the interest of
        Parent and its Subsidiaries in and to the Oil and Gas Properties as set forth
        in
        the Initial Reserve Report or the most recent Reserve Report, as the case
        may
        be, includes the entire interest of Parent and its Subsidiaries in such Oil
        and
        Gas Properties as of the date of the Initial Reserve Report or such applicable
        Reserve Report delivered by Borrower to Agent pursuant to Section 5.20, as
        the
        case may be, and are complete and accurate in all material respects as of
        the
        date of the Initial Reserve Report or such applicable Reserve Report, as
        the
        case may be; and there are no “back-in” or “reversionary” interests held by
        third parties which could materially reduce the interest of Parent (or any
        of
        its Subsidiaries, as the case may be) in such Oil and Gas Properties except
        as
        expressly set forth in the Initial Reserve Report or the most recent Reserve
        Report, as the case may be.  Except as set forth on Schedule 4.25, the
        ownership of the Oil and Gas Properties by Parent and each of its Subsidiaries
        shall not in any material respect obligate Parent or any such Subsidiary
        to bear
        the costs and expenses relating to the maintenance, development or operations
        of
        each such Oil and Gas Property in an amount in excess of the working interest
        of
        record of Parent (or any such Subsidiary, as applicable) in each Oil and
        Gas
        Property set forth in the Initial Reserve Report or the most recent Reserve
        Report, as the case may be.

       

      (c)  Parent’s
        and each of its Subsidiaries’ marketing, gathering, transportation, processing
        and treating facilities and equipment, together with any marketing, gathering,
        transportation, processing and treating contracts in effect between and/or
        among
        Parent, its Subsidiaries and any other Person, are or are reasonably anticipated
        to be sufficient to gather, transport, process and/or treat, volumes of
        production of Hydrocarbons from the Oil and Gas Properties of Parent and
        its
        Subsidiaries, as applicable, that are contemplated by the Initial Reserve
        Report
        or most recent Reserve Report, as the case may be.

       

      4.26  Nature
        of Business.  Neither
        Parent nor any of its Subsidiaries is engaged in any business other than
        the Oil
        and Gas Business within the continental United States and Canada.

       

      4.27  Seismic
        Licenses.  To
        the extent not prohibited by the terms thereof, or any confidentiality
        agreement, Schedule 4.27 identifies all of the license agreements relating
        to
        the performance of seismic exploration on the Oil and Gas Properties (“Seismic
        Licenses”) to which Parent and its Subsidiaries are a party as of the date
        hereof.  With respect to the Seismic Licenses: (i) all Seismic
        Licenses are in effect and have not expired or terminated; (ii) neither Parent
        nor any Subsidiary is in material breach or material default, and there has
        occurred no event, fact, or circumstance, that, with the lapse of time or
        the
        giving of notice, or both, would constitute such a material breach or material
        default by Parent or any of its Subsidiaries, as applicable, with respect
        to the
        terms of any Seismic License; and (iii) neither Parent, nor any Subsidiary
        thereof, nor, to the knowledge of Parent and its Subsidiaries, any other
        party
        to any Seismic License has given written notice of any action to terminate,
        cancel, rescind, or procure a judicial reformation of any Seismic License
        or any
        provision thereof.

       

      4.28  Marketing
        of Production.  Except
        for contracts listed and in effect on the date hereof on Schedule 4.28, and
        thereafter either disclosed in writing to Agent or included in the most recently
        delivered Reserve Report (with respect to all of which contracts Borrower
        represents that it, the Parent and its Subsidiaries are receiving a price
        for
        all production sold thereunder which is computed substantially in accordance
        with the terms of the relevant contract and are not having deliveries curtailed
        substantially below the subject Property’s delivery capacity), no material
        agreements exist which are not cancelable on sixty (60) days notice or less
        without penalty or detriment for the sale of production from Borrower’s or its
        Subsidiaries’ (or Parent’s) Hydrocarbons (including, without limitation, calls
        on or other rights to purchase, production, whether or not the same are
        currently being exercised) that (a) pertain to the sale of production at
        a fixed
        price and (b) have a maturity or expiry date of more than six (6) months
        from
        the date hereof.  All proceeds from the sale of Borrower’s (and its
        Subsidiaries’ and Parent’s) Hydrocarbon Interests from their Oil and Gas
        Properties will be paid in full to the applicable party by the purchaser
        thereof
        on a timely basis, and none of such proceeds are currently being held in
        suspense by such purchaser or any other Person.  Except as set forth
        in Schedule 4.28, none of the Oil and Gas Properties of Parent or any Subsidiary
        thereof are subject to any contractual or other arrangement whereby payment
        for
        production therefrom is to be deferred for a substantial period of time after
        the month in which such production is delivered (i.e., in the case of oil,
        not
        in excess of sixty (60) days, and in the case of gas, not in excess of ninety
        (90) days).

       

      4.29  Senior
        Indebtedness.  The Obligations constitute “Senior
        Indebtedness” under the terms of the Subordination and Intercreditor Agreement,
        the Loan Documents constitute “Bank Loan Documents” , the Lenders and Agent
        constitute “Senior Lenders” and the Bank Product Providers constitute “Senior
        Affiliates” each under the terms of the Subordination and Intercreditor
        Agreement.

       

      5.  AFFIRMATIVE
        COVENANTS.

       

      Borrower
        covenants and agrees that, until termination of all of the Commitments and
        repayment in full of the Obligations, Borrower shall and shall cause Parent
        and
        each of its Subsidiaries to do all of the following:

       

      5.1  Accounting
        System.  Maintain
        a system of accounting that enables Parent to produce financial statements
        in
        accordance with GAAP and maintain records pertaining to the Collateral in
        accordance with customary industry practice.

       

      
        
          
          

        

        
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      5.2  Collateral
        Reporting.  Provide
        Agent (and if so requested by Agent, with copies for each Lender) with each
        of
        the reports set forth on Schedule 5.2 at the times specified
        therein.

       

      5.3  Financial
        Statements, Reports, Certificates.  Deliver
        to Agent, with copies to each Lender, each of the financial statements, reports,
        or other items set forth on Schedule 5.3 at the times specified
        therein.  In addition, Borrower agrees that no Subsidiary of Borrower
        or Parent will have a fiscal year different from that of Borrower.

       

      5.4  Guarantor
        Reports.  Cause
        each Guarantor to deliver its annual financial statements at the time when
        Borrower provides its audited financial statements to Agent, but only to
        the
        extent such Guarantor’s financial statements are not consolidated with
        Borrower’s financial statements.

       

      5.5  Inspection. Permit
        Agent, each Lender, and each of their duly authorized representatives or
        agents,
        at the sole cost of Borrower, to visit any of the properties of Parent or
        its
        Subsidiaries and inspect any of the assets or books and records of Parent
        or any
        of its Subsidiaries, to examine and make copies of the books and records
        of
        Parent or its Subsidiaries, and to discuss the affairs, finances, and accounts
        with, and to be advised as to the same by, the officers and employees of
        Parent
        or its Subsidiaries at such reasonable times and intervals as Agent or any
        such
        Lender may designate and, so long as no Event of Default exists, with reasonable
        prior notice to Borrower; provided, however, that so long as no Event of
        Default
        shall have occurred and be continuing, Borrower shall not be responsible
        for the
        costs of more than two (2) inspection visits per calendar year.

       

      5.6  Maintenance
        of Properties.  Borrower
        will, and will cause each of its Subsidiaries and Parent to:

       

      (a)  prudently
        operate its Proved Oil and Gas Properties for the production of Hydrocarbons,
        operate its other Properties and, to the extent Parent or one of its
        Subsidiaries is not the operator of a Property in which it has an interest,
        Borrower shall use commercially reasonable efforts to cause the operator
        to
        operate such Property, in each case in accordance with the practices of the
        industry, in material compliance with all applicable Material Contracts,
        in the
        case of Proved Oil and Gas Properties in accordance with good engineering
        practices consistent with industry practice except as could not reasonably
        be
        expected to result in a Material Adverse Change, and in all cases, in compliance
        with all applicable laws, including, without limitation, applicable proration
        requirements (other than Environmental Laws, which are addressed in Section
        5.12
        below), and all other applicable laws, rules and regulations of every other
        Governmental Authority from time to time constituted to regulate the development
        and operation of its Oil and Gas Properties and the production and sale of
        Hydrocarbons and other minerals therefrom except for the non-compliance of
        which
        could not reasonably be expected to result in a Material Adverse
        Change;

       

      (b)  keep
        and
        maintain all Property material to the conduct of its business in good working
        order and condition, ordinary wear and tear and casualty events excepted,
        preserve, maintain and keep in good repair, working order (ordinary wear
        and
        tear and casualty events excepted) all of its material Proved Oil and Gas
        Properties and other material Properties, including, without limitation,
        all
        equipment, machinery, facilities, and marketing, gathering, transportation
        and
        processing assets and, from time to time, will make all the reasonably necessary
        repairs, renewals and replacements so that at all times the state and conditions
        of such Oil and Gas Properties and other material Properties will be fully
        preserved and maintained in a manner sufficient to permit reasonable operation
        in accordance with good oilfield practices, except to the extent a portion
        of
        such assets is no longer capable of producing Hydrocarbons in economically
        reasonable amounts;

       

      (c)  except
        for payments subject to a Permitted Protest, promptly pay and discharge prior
        to
        the expiration of any applicable cure period, or make efforts to cause to
        be
        paid and discharged, all material delay rentals, royalties, expenses and
        indebtedness accruing under Material Contracts affecting or pertaining to
        its
        Proved Oil and Gas Properties in a manner that could reasonably be expected
        to
        keep unimpaired their material rights with respect thereto and prevent any
        forfeiture thereof or other default thereunder; and

       

      (d)  promptly
        perform or make reasonable and customary efforts to cause to be performed,
        in
        accordance with industry standards, the obligations required by each and
        all of
        the Material Contracts affecting its interests in its Proved Oil and Gas
        Properties and other material Properties  in a manner that could
        reasonably be expected to keep unimpaired, except for Permitted Liens, its
        rights with respect thereto and prevent any forfeiture thereof, a default
        thereunder, or any deficiency payment thereunder, except to the extent a
        portion
        of such properties is no longer capable of producing Hydrocarbons in
        economically reasonable amounts.

       

      5.7  Taxes.  Cause
        all assessments and taxes, whether real, personal, or otherwise, due or payable
        by, or imposed, levied, or assessed against Parent, Borrower, their
        Subsidiaries, or any of their respective assets to be paid in full, before
        delinquency or before the expiration of any extension period, except to the
        extent that the validity of such assessment or tax shall be the subject of
        a
        Permitted Protest.  Borrower will and will cause its Subsidiaries and
        Parent to make timely payment or deposit of all tax payments and withholding
        taxes required of it and them by applicable laws, including those laws
        concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
        income taxes, and will, upon request, furnish Agent with proof satisfactory
        to
        Agent indicating that Parent and its Subsidiaries have made such payments
        or
        deposits.

       

      
        
          
          

        

        
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      5.8  Insurance.

       

      (a)  At
        Borrower’s expense, maintain insurance respecting its and its Subsidiaries’
assets (and the Parent) wherever located, covering loss or damage by fire,
        theft, explosion, and all other hazards and risks as ordinarily are insured
        against by other Persons engaged in the same or similar businesses operating
        in
        the same or similar locations.  The Parent and its Subsidiaries shall
        maintain public liability, and product liability insurance, as well as insurance
        against larceny, embezzlement, and criminal misappropriation.  In
        addition, each of the the Parent and its Subsidiaries shall maintain performance
        bonds in respect of its operations related to its respective Oil and Gas
        Properties in such amounts and in such manner as is customary for companies
        engaged in the same or similar business operating in the same or similar
        locations.  All such policies of insurance shall be in such amounts
        and with such insurance companies as are reasonably satisfactory to Agent,
        it
        being agreed that the insurance policies and amounts maintained by Parent
        and
        its Subsidiaries as of the Closing Date are satisfactory.  Borrower
        shall deliver copies of all such policies to Agent with an endorsement naming
        Agent (on behalf of the Lenders) as loss payee (under a satisfactory lender’s
        loss payable endorsement) or additional insured, as appropriate.  Each
        policy of insurance or endorsement shall contain a clause requiring the insurer
        to give not less than thirty (30) days prior written notice to Agent in the
        event of cancellation of the policy for any reason whatsoever.  During
        the period of the drilling of wells and the construction of any other
        improvements comprising a part of the Oil and Gas Properties of Parent and
        its
        Subsidiaries, Borrower shall, cause its contractors or subcontractors to
        (and
        shall cause its Subsidiaries and their contractors and subcontractors to),
        obtain and maintain well control insurance (including coverage for costs
        and
        redrilling) and builder’s risk insurance, as applicable, in such form and
        amounts as is customary in the industry (it being understood that such insurance
        is not required with respect to drilling and construction associated with
        coal
        bed methane wells in Wyoming) and worker’s compensation
        insurance covering all Persons employed by Parent and its Subsidiaries or
        its or
        their agents or subcontractors of any tier in connection with any construction
        affecting such Oil and Gas Properties, including, without limitation, all
        agents
        and employees of Parent and its Subsidiaries and its and their subcontractors
        with respect to whom death or bodily injury claims could be asserted against
        Parent or any Subsidiary thereof.  If Borrower or any Guarantor at any
        time or times hereafter shall fail to obtain or maintain any of the policies
        of
        insurance required above or to pay all premiums relating thereto, Agent may
        at
        any time or times thereafter obtain and maintain such policies of insurance
        and
        pay such premiums and take any other action with respect thereto which Agent
        deems advisable; provided that prior to a Default or Event of Default, Agent
        shall not obtain any new insurance policies without prior consultation with
        Borrower.  Agent shall have no obligation to obtain insurance for
        Borrower or any Guarantor or pay any premiums therefor.  By doing so,
        Agent shall not be deemed to have waived any Default or Event of Default
        arising
        from Borrower’s or any Guarantor’s failure to maintain such insurance or pay any
        premiums therefor.  All sums so disbursed, including reasonable
        attorneys’ fees, court costs and other charges related thereto, shall be payable
        on demand by Borrower to Agent and shall be additional Obligations hereunder
        secured by the Collateral.

       

      (b)  Agent
        reserves the right at any time upon any material change in Borrower’s or any
        Guarantor’s risk profile (including any change laws affecting the potential
        liability of Borrower or such Guarantor) to require additional forms and
        limits
        of insurance to, in Agent’s reasonable opinion, adequately protect both Agent’s
        and Lenders’ interests in all or any portion of the Collateral and to ensure
        that each Loan Party is protected by insurance in amounts and with
        coverage  in compliance with the requirements of Section
        5.8(a).  If requested by Agent, Borrower or any Guarantor shall
        deliver to Agent from time to time a report of a reputable insurance broker,
        satisfactory to Agent, with respect to its insurance policies.

       

      (c)  Borrower
        shall give Agent prompt notice of any loss exceeding Two Hundred Fifty Thousand
        Dollars ($250,000) covered by such insurance.  So long as no Event of
        Default has occurred and is continuing, Borrower shall have the exclusive
        right
        to adjust any losses payable under any such insurance
        policies.  Following the occurrence and during the continuation of an
        Event of Default, Agent shall have the exclusive right to adjust any losses
        payable under any such insurance policies, without any liability to Borrower
        whatsoever in respect of such adjustments.

       

      (d)  Borrower
        will not, and will not suffer or permit its Subsidiaries or Parent to, take
        out
        separate insurance concurrent in form or contributing in the event of loss
        with
        that required to be maintained under this Section 5.8, unless Agent is included
        thereon as an additional insured or loss payee under a lender's loss payable
        endorsement.  Borrower shall notify Agent promptly whenever such
        separate insurance is taken out, specifying the insurer and the type and
        amount
        of insurance provided thereunder as to the policies evidencing the same,
        and
        copies of such policies shall be provided to Agent promptly after receipt
        by
        Loan Parties thereof.  

       

      5.9  Compliance
        with Laws.  Comply
        with the requirements of all applicable laws, rules, regulations, and orders
        of
        any Governmental Authority, other than Environmental Laws (which are addressed
        in Section 5.12 below) and laws, rules, regulations, and orders (other than
        Environmental Laws) the non-compliance with which, individually or in the
        aggregate, could not reasonably be expected to result in a Material Adverse
        Change. Each shall obtain and maintain all licenses, permits, franchises,
        and
        governmental authorizations (other than Environmental Permits, which are
        addressed in Section 5.12 below) required to own its property and to conduct
        its
        business as conducted on the Closing Date, except as could not reasonably
        be
        expected to result in a Material Adverse Change.

       

      5.10  [Intentionally
        Omitted.]

       

             
        5.11  Existence.  At
        all times preserve and keep in full force and effect Borrower’s and its
        Subsidiaries and Parent’s, valid existence and good standing and, except as
        could not reasonably be expected (either individually or in the aggregate)
        to
        result in a Material Adverse Change, any rights, franchises, permits, licenses,
        accreditations, authorizations, or other approvals material to their
        businesses.

       

      5.12  Environmental. 

       

      (a)  Except
        as
        could not reasonably be expected to result in a Material Adverse Change,
        (i)
        keep any Real Property free of any Environmental Liens or (ii) post bonds
        or
        other financial assurances sufficient to satisfy the obligations or liability
        evidenced by such Environmental Liens, in each case, to the extent such
        Environmental Liens arise from any Environmental Liability of Parents or
        its
        Subsidiaries;

       

      
        
          
          

        

        
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      (b)  Except
        as
        could not reasonably be expected to result in a Material Adverse Change,
        comply with all Environmental Laws and Environmental Permits; obtain and
        maintain in full force and effect all Environmental Permits; and conduct
        all
        actions, including Response Actions, required under any Environmental Actions
        or
        applicable Environmental Laws, and in compliance with, the lawful requirements
        of any Governmental Authority and applicable Environmental Laws;

       

      (c)  Except
        as
        could not reasonably be expected to result in a Material Adverse Change,
        do or
        cause to be taken all commercially reasonable steps necessary to prevent
        any
        Release caused by Parent or any of its Subsidiaries, or any contractor, employee
        or agent thereof, in, on, under, to or from any Real Property except in full
        compliance with applicable Environmental Laws or an Environmental Permit,
        and
        (ii) ensure that Parent, any Subsidiary, and any contractor, employee or
        agent
        thereof, shall not use, store, handle or manage Hazardous Materials in, on,
        under or from any Real Property except those that are used, stored, handled
        and
        managed in compliance with applicable Environmental Laws;

       

      (d)  Except
        as
        could not reasonably be expected to result in a Material Adverse Change,
        undertake all commercially reasonable actions, including Response Actions,
        necessary, at the sole cost and expense of Borrower or its Subsidiaries,
        to
        address (i) any Environmental Action and any obligations thereunder; (ii)
        any
        Release at, from or onto any Real Property as required pursuant to Environmental
        Law or the requirements of any Governmental Authority; and (iii) Environmental
        Liability;

       

      (e)  Diligently
        pursue and use commercially reasonable efforts to cause any Person with an
        indemnity, contribution or other obligation to any of the Loan Parties or
        their
        Subsidiaries relating to any Environmental Action or compliance with or
        liability under Environmental Law to satisfy such obligations in full and
        in a
        timely manner; and shall not amend in any way or waive any or all rights
        to such
        obligations without the prior written consent of Agent, which shall not be
        unreasonably withheld;

       

      (f)  Upon
        Agent’s reasonable request,
        promptly provide to Agent documentation reasonably acceptable
        to Agent
of compliance with
        items
        (a) through (e), including, without limitation, within 45
        days following a written request of Agent, but no more frequently than once
        each
        year unless an Event of Default exists, pursuant to Section 5.12(g) below,
        or a
        Default caused by reason of a breach of Sections 4.11 or 5.12 herein, provide
        Agent with an environmental assessment, including where appropriate and
        permitted by the applicable lease, any soil and/or groundwater sampling,
        prepared by an environmental consulting firm reasonably acceptable to Agent,
        and
        in form and substance reasonably acceptable to Agent;

       

      (g)  Promptly,
        but in any event within ten (10) Business Days of its obtaining knowledge
        thereof, provide Agent with written notice of, and all data, information
        and
        reports generated or prepared in connection with, any of the following: (i)
        an
        Environmental Lien has been filed or is threatened against the Real Property
        or
        any personal property of Parent or its Subsidiaries, (ii) commencement of
        any
        material Environmental Action or notice that a material Environmental Action
        will be filed against Parent or its Subsidiaries, and (iii) any Release or
        threatened Release in, on, under, at, from or migrating to any Real Property
        owned, leased or operated by any of Parent or its Subsidiaries that requires
        reporting by Borrower under any Environmental Law, except as otherwise pursuant
        to and in compliance with the terms and conditions of an Environmental Permit
        or
        any Environmental Law and not including any report required under the Emergency
        Planning and Community Right to Know Act or similar state and local laws,
        (iv)
        any material non-compliance with, or violation of, any Environmental Law
        applicable to any Parent, any Subsidiary, any Parent’s business and any Real
        Property, (v) any Response Action which could reasonably be expected to result
        in a material Environmental Liability to Parent or any Subsidiary, (vi) any
        material notice or other material communication received by any Parent or
        Subsidiary from any Person or Governmental Authority relating to any material
        Environmental Liability of Parent or any Subsidiary. Notwithstanding the
        foregoing, nothing in this Section 5.12 shall require Parent or any of its
        Subsidiaries to provide any notice or communication that would waive any
        applicable privilege.

       

      5.13  Disclosure
        Updates.  Promptly
        and in no event later than five (5) Business Days after obtaining knowledge
        thereof, notify Agent if any written information, exhibit, or report furnished
        to the Lender Group contained, at the time it was furnished, any untrue
        statement of a material fact or omitted to state any material fact necessary
        to
        make the statements contained therein not materially misleading in light
        of the
        circumstances in which made.  The foregoing to the contrary
        notwithstanding, any notification pursuant to the foregoing provision will
        not
        cure or remedy the effect of the prior untrue statement of a material fact
        or
        omission of any material fact nor shall any such notification have the effect
        of
        amending or modifying this Agreement or any of the Schedules hereto; provided,
        however, that in no event shall the requirements of this Section 5.13 apply
        to
        any Projections, forecasts or other forward looking statements provided to
        the
        Agent or the Lender Group.

       

      5.14  Control
        Agreements.  To
        the extent required under the Loan Documents, take all reasonable steps in
        order
        for Agent to obtain control in accordance with Sections 8-106, 9-104, 9-105,
        9-106, and 9-107 of the Code with respect to (subject to the proviso contained
        in Section 6.12) all of its Securities Accounts, Deposit Accounts, and all
        of
        its electronic chattel paper, investment property, and letter-of-credit
        rights other than all such items with an aggregate value not exceeding Five
        Hundred Thousand Dollars ($500,000).

       

      5.15  Formation
        of Subsidiaries.  To
        the extent permitted under this Agreement, if at the time that Borrower or
        any Guarantor forms any direct or indirect Subsidiary or acquires any direct
        or
        indirect Subsidiary after the Closing Date, within ten (10) Business Days
        following formation or acquisition, Borrower or such Guarantor shall (a)
        cause
        such new Subsidiary to provide to Agent a joinder to the Guaranty and the
        Security Agreement, together with such other security documents (including
        Mortgages with respect to any Real Property of such new Subsidiary when required
        to satisfy the requirements of Section 5.16), as well as appropriate financing
        statements (and with respect to all property subject to a Mortgage, fixture
        filings), all in form and substance satisfactory to Agent (including being
        sufficient to grant Agent a first priority Lien (subject to Permitted Liens)
        in
        and to the assets of such newly formed or acquired Subsidiary), (b) provide
        to
        Agent a pledge agreement and appropriate certificates and powers or financing
        statements, hypothecating all of the direct or beneficial ownership interest
        in
        such new Subsidiary, in form and substance satisfactory to Agent, and (c)
        provide to Agent all other documentation, including, if requested by Agent,
        one
        or more opinions of counsel reasonably satisfactory to Agent, which in its
        opinion is appropriate with respect to the execution and delivery of the
        applicable documentation referred to above (including policies of title
        insurance or other documentation with respect to all property subject to
        a
        Mortgage, subject to any limitation expressly set forth in Section 5.22);
        provided however, that the foregoing obligations shall not apply to any
        Subsidiary prior to such time as it owns assets with more than a de minimus
        value.  Any document, agreement, or instrument executed or issued
        pursuant to this Section 5.16 shall be a Loan Document.

       

      
        
          
          

        

        
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      5.16  Further
        Assurances.  At
        any time upon the request of Agent, Borrower shall within thirty (30) days
        (unless there is an imminent threat to Agent’s or any Lender’s perfection on any
        portion of the Collateral, in which case, promptly upon request) execute
        or
        deliver to Agent, and shall cause its Subsidiaries or the Parent, as applicable,
        to execute or deliver to Agent, any and all financing statements, personal
        property security act filings, fixture filings, security agreements, pledges,
        assignments, endorsements of certificates of title, mortgages, deeds of trust,
        opinions of counsel, and all other documents (collectively, the “Additional
        Documents”) that Agent may reasonably request in form and substance reasonably
        satisfactory to Agent, to create, perfect, and continue perfected or to better
        perfect Agent’s Liens with respect to Oil and Gas Properties that are required
        to be mortgaged pursuant to this Section 5.16 and all of the other properties
        and assets of Parent and its Subsidiaries (whether now owned or hereafter
        arising or acquired, tangible or intangible, real or personal), to create
        and
        perfect Liens in favor of Agent in any Real Property acquired by Parent or
        its
        Subsidiaries after the Closing Date, and in order to fully consummate all
        of the
        transactions contemplated hereby and under the other Loan Documents, provided
        that Section 5.21 shall govern the obligation of Borrower and its Subsidiaries
        and Parent to deliver title information with respect to Oil and Gas
        Properties.  To the maximum extent permitted by applicable law,
        Borrower authorizes Agent to file such executed Additional Documents in any
        appropriate filing office.  If at any time the
        aggregate  Total Reserve Value of the Proved Oil and Gas Properties
        evaluated in the most recent Reserve Report for which the Agent shall have
        received Mortgages encumbering such Proved Oil and Gas Properties constitutes
        less than (a) eighty percent (80%) of the aggregate Total Reserve Value and
        (b)
        ninety percent (90%) of the aggregate Proved Developed Producing Reserves
        of all
        Oil and Gas Properties of Parent and its Subsidiaries evaluated in the most
        recent Reserve Report, it being agreed that the Proved Reserves not subject
        to
        any Mortgage shall not constitute a Proved Reserve that is reasonably necessary
        to the integral operation of the Proved Reserves subject to Mortgages, Borrower
        shall (and shall cause Parent or any applicable Subsidiary to) promptly:
        (a)
        execute and deliver to Agent Mortgages covering additional Oil and Gas
        Properties, amendments to the Mortgages or such other documents as Agent
        shall
        deem necessary or advisable to grant to Agent, for the benefit of the Lenders,
        a
        perfected first priority Lien on such Oil and Gas Properties with (a) a Total
        Reserve Value consisting not less than eighty percent (80%) of the aggregate
        Total Reserve Value and (b) Proved Developed Producing Reserves consisting
        not
        less than ninety percent (90%) of the aggregate Proved Developed Producing
        Reserves of all Oil and Gas Properties of Parent and its Subsidiaries evaluated
        in the most recent Reserve Report; and (b) take all actions necessary or
        advisable to cause such Lien to be duly perfected in accordance with all
        applicable law, including, without limitation, the filing of Mortgages, or
        UCC
        financing statements in such jurisdictions as may be reasonably requested
        by
        Agent; provided, however, that in the case of Oil and Gas Properties, such
        obligations shall be subject to the obtaining of any necessary third party
        consents, which Borrower shall use commercially reasonable efforts to
        obtain.

       

      5.17  Material
        Contracts.  Contemporaneously
        with the delivery of each Compliance Certificate pursuant hereto, provide
        Agent
        with copies of (a) each Material Contract entered into since the delivery
        of the
        previous Compliance Certificate, and (b) each material amendment or modification
        of any Material Contract entered into since the delivery of the previous
        Compliance Certificate.

       

      5.18  Intellectual
        Property. Parent
        and each Subsidiary will use all reasonable efforts to conduct its business
        and
        affairs without material infringement of or interference with any intellectual
        property of any other Person, and, in the event Borrower acquires knowledge
        of
        any such infringement or interference, will promptly cease such infringement
        or
        interference.

       

      5.19  Exercise
        of Rights.  Borrower
        and each Guarantor shall enforce all of its material rights as appropriate
        in
        its commercially reasonable judgment, including, without limitation, all
        material indemnification rights, and pursue as appropriate in its commercially
        reasonable judgment all material remedies available to Borrower or such
        Guarantor with diligence and in good faith in connection with the enforcement
        of
        any such rights.

       

      5.20  Reserve
        Reports.

       

      (a)  On
        or
        before March 3rd and September 3rd of each year, commencing March 3, 2008,
        Borrower shall furnish to Agent and the Lenders a Reserve Report as of the
        immediately preceding January 1 or July 1, as applicable.  The Reserve
        Report as of January 1 of each year shall be prepared by Netherland, Sewell
        & Associates, Inc. of Houston, Texas or one or more other independent third
        party Petroleum Engineers reasonably acceptable to Agent and the Reserve
        Report
        as of July 1 of each year shall be prepared by or under the supervision of
        the
        chief engineer of Borrower who shall certify such Reserve Report to be true
        and
        accurate in all material respects and to have been prepared in accordance
        with
        the procedures used in the immediately preceding January 1 Reserve
        Report.

       

      (b)  In
        the
        event of an Interim Redetermination, Borrower shall furnish to Agent and
        the
        Lenders a Reserve Report prepared by or under the supervision of the chief
        engineer of Borrower who shall certify such Reserve Report to be true and
        accurate in all material respects and to have been prepared in accordance
        with
        the procedures used in the immediately preceding January 1 Reserve
        Report.  For any Interim Redetermination requested by Agent or
        Borrower pursuant to Section 2.1, Borrower shall provide such Reserve Report
        with an “as of” date as required by Agent as soon as possible, but in any event
        no later than sixty-two (62) days following the receipt of such
        request.

       

      (c)  With
        the
        delivery of each Reserve Report, Borrower shall provide to Agent and the
        Lenders
        a certificate from a Responsible Officer certifying that in all material
        respects: (i) the
        information contained in the Reserve Report and any other information delivered
        in connection therewith is true and correct, (ii) Borrower or its
        Subsidiaries owns Defensible Title to the Proved Oil and Gas Properties
        evaluated in such Reserve Report, (iii) except as set forth
        on an
        exhibit to the certificate, on a net basis there are no gas imbalances, take
        or
        pay or other prepayments in excess of the volume specified in Section 4.23
        with
        respect to their Oil and Gas Properties evaluated in such Reserve Report
        that
        would require Borrower or any of its Subsidiaries to deliver Hydrocarbons
        either
        generally or produced from such Oil and Gas Properties at some future time
        without then or thereafter receiving full payment therefor, (iv) none of their Proved
        Oil
        and Gas Properties have been sold since the date of the last Borrowing Base
        determination except as set forth on an exhibit to the certificate, which
        certificate shall list all of its Proved Oil and Gas Properties sold and
        in such
        detail as reasonably required by Agent, (v) attached to the certificate
        is a list of all marketing agreements entered into subsequent to the later
        of
        the date hereof or the most recently delivered Reserve Report that Borrower
        could reasonably be expected to have been obligated to list on Schedule 4.28
        had
        such agreement been in effect on the date hereof, (vi) attached thereto
        is a
        schedule of the Oil and Gas Properties evaluated by such Reserve Report that
        are
        Mortgaged Properties and demonstrating the percentage of the present value
        that
        such Mortgaged Properties represent, and (vii) to the extent required
        under the Loan Documents, all Proved Oil and Gas Properties are subject to
        the
        Security Documents securing the Obligations, and such Security Documents
        constitute legal, valid and duly perfected, first priority security interests
        and Liens in favor of Agent in such properties and in the oil and gas
        attributable to such properties and proceeds thereof.

       

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

      5.21  Title
        Information.

       

      (a)  On
        or
        prior to the Closing Date, Borrower will deliver title information in form
        and
        substance reasonably acceptable to Agent (which the Agent acknowledges may
        be in
        the form of a title opinion) covering enough of the Proved Oil and Gas
        Properties evaluated by the Initial Reserve Report, so that Agent shall have
        received, together with title information previously delivered to Agent,
        reasonably satisfactory title information on at least eighty percent (80%)
        of
        the Total Reserve Value of the Proved Oil and Gas Properties evaluated by
        the
        Initial Reserve Report.

       

      (b)  On
        or
        before the delivery to Agent and the Lenders of each Reserve Report required
        by
        Section 5.20(a), Borrower will deliver title to Agent covering enough of
        the
        Proved Oil and Gas Properties evaluated by such Reserve Report that were
        not
        included in the immediately preceding Reserve Report, so that Agent shall
        have
        received together with title information previously delivered to Agent,
        reasonably satisfactory title information evidencing Defensible Title on
        at
        least eighty percent (80%) of the Total Reserve Value of the Proved Oil and
        Gas
        Properties evaluated by such Reserve Report.

       

      (c)  If
        Borrower has provided title information for additional Properties under
        Section 5.21(b), Borrower shall, within sixty (60) days of notice from
        Agent that title defects or exceptions exist with respect to such additional
        Properties which render Borrower’s title not a Defensible Title, either (i) cure
        to the satisfaction of Agent any such title defects or exceptions (including
        defects or exceptions as to priority) which are not permitted by Section
        6.2
        raised by such information, (ii) substitute acceptable Mortgaged Properties
        with
        Defensible Title having an equivalent value or (iii) deliver revised title
        information in form and substance reasonably acceptable to Agent so that
        Agent
        shall have received, together with title information previously delivered
        to
        Agent, reasonably satisfactory title information on at least eighty percent
        (80%) of the Total Reserve Value of the Proved Oil and Gas Properties evaluated
        by such Reserve Report.  For purposes of clarity, Agent shall be
        permitted to establish reserves against the then-existing Borrowing Base
        pursuant to Section 2.1(b) to the extent that the Agent does not receive
        satisfactory title as determined in this clause (c).

       

      (d)  If
        Borrower is unable to cure any title defect requested to be cured pursuant
        to
        Section 5.21(c) within the sixty (60)-day period or Borrower does not comply
        with the requirements of Section 5.21(b) to provide acceptable title information
        covering eighty percent (80%) of the Total Reserve Value of the Proved Oil
        and
        Gas Properties evaluated in the most recent Reserve Report, such default
        shall
        not be a Default, but instead Agent and/or the Required Lenders shall have
        the
        right to exercise the following remedy in their reasonable discretion from
        time
        to time, and any failure to so exercise this remedy at any time shall not
        be a
        waiver as to future exercise of the remedy by Agent or the
        Lenders.  To the extent that Agent or the Required Lenders are not
        reasonably satisfied with title to any Mortgaged Property after the 60-day
        period has elapsed, such unacceptable Mortgaged Property shall not count
        towards
“the eighty percent (80%) requirement,” and Agent may send a notice to Borrower
        and the Lenders that the then outstanding Borrowing Base shall be reduced
        by an
        amount as determined by the Required Lenders to cause Borrower to be in
        compliance with the requirement to provide acceptable title information on
        eighty percent (80%) of the Total Reserve Value of the Proved Oil and Gas
        Properties pursuant to this Section 5.21.  This new Borrowing Base
        shall become effective on the third Business Day after receipt of such
        notice.

       

      5.22  Swap
        Agreements.  Subject
        to the provisions of Section 6.24, Borrower shall maintain in effect (and
        cause
        its Subsidiaries to maintain) one or more Swap Agreements with respect to
        its
        Hydrocarbon production, with the aggregate notional volumes of Hydrocarbons
        covered by such Swap Agreements constituting not less than fifty percent
        (50%)
        of the aggregate amount of Borrower's (and its Subsidiaries’) estimated
        Hydrocarbon production volumes on an Mcf equivalent basis (where one barrel
        of
        oil is equal to six (6) Mcf of gas) for the succeeding twelve (12) calendar
        months on a rolling twelve (12) month basis for such period from Oil and
        Gas
        Properties classified as Proved Developed Producing Reserves in the most
        recent
        Reserve Report delivered pursuant to Section 5.20.  Borrower shall use
        (and cause its Subsidiaries to use) such Swap Agreements solely as a part
        of
        their normal business operations as a risk management strategy and/or hedge
        against changes resulting from market conditions related to their oil and
        gas
        operations and not as a means to speculate for investment purposes on trends
        and
        shifts in financial or commodities markets.

       

      5.23  [Intentionally
        Omitted].

       

      5.24  Post
        Closing Obligations.  No later than January 30, 2008, (i)
        Borrower shall use its commercially reasonable efforts to deliver to the Agent a
        Collateral Access Agreement with respect to the leased property located at
        1125
        17th Street, Suite 2310, Denver, Colorado 80202 and (ii) Borrower shall,
        or
        shall cause Parent, as applicable, to deliver to Agent Control Agreements
        with
        American National Bank and Nova Scotia Bank with respect to Deposit Accounts
        of
        the Loan Parties held at such banks.

       

      6.  NEGATIVE
        COVENANTS.

       

      Borrower
        covenants and agrees that, until termination of all of the Commitments and
        repayment in full of the Obligations, Borrower will not and will not permit
        any
        of its Subsidiaries and will not cause the Parent to do any of the
        following:

       

      6.1  Indebtedness.  Create,
        incur, assume, suffer to exist, guarantee, or otherwise become or remain,
        directly or indirectly, liable with respect to any Indebtedness,
        except:

       

      (a)  Indebtedness
        evidenced by this Agreement and the other Loan Documents, together with
        Indebtedness owed to Underlying Issuers with respect to Underlying Letters
        of
        Credit;

       

      (b)  Indebtedness
        relating to the Convertible Subordinated Notes and other Indebtedness set
        forth
        on Schedule 4.16 and any Refinancing Indebtedness in respect of such
        Indebtedness;

       

      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

      (c)  Permitted
        Purchase Money Indebtedness and any Refinancing Indebtedness in respect of
        such
        Indebtedness;

       

      (d)  endorsement
        of instruments or other payment items for deposit;

       

      (e)  Indebtedness
        associated with bonds or surety obligations required by Governmental
        Requirements or otherwise in the ordinary course of business in connection
        with
        the operation of the Oil and Gas Properties; provided, that Indebtedness
        permitted by this Section 6.1 will not exceed $2,000,000 in the aggregate
        at any
        one time outstanding;

       

      (f)  Indebtedness
        composing Permitted Investments; and

       

      (g)  intercompany
        Indebtedness described in Section 6.12(a).

       

      6.2  Liens.  Create,
        incur, assume, or suffer to exist, directly or indirectly, any Lien on or
        with
        respect to any of its assets, of any kind, whether now owned or hereafter
        acquired, or any income or profits therefrom, except for Permitted
        Liens.

       

      6.3  Restrictions
        on Fundamental Changes.

       

              (a)  Consummate
        any merger, consolidation, amalgamation, reorganization, or recapitalization,
        or
        reclassification of its Stock;

       

      (b)  Liquidate,
        wind up, or dissolve itself (or suffer any liquidation or dissolution); provided
        that any such transaction shall be permitted with respect to a Subsidiary
        that
        does not own any assets; or

       

      (c)  Suspend
        or go out of a substantial portion of its or their business;

       

      provided,
        that any Guarantor (other than Parent) may merge with or into any other
        Guarantor (other than Parent) and any Guarantor (other than Parent) may merge
        with or into Borrower, so long as (i) in the case of a merger of a Guarantor
        with Borrower, Borrower is the surviving entity, (ii) no other provision of
        this Agreement would be violated thereby, (iii) Agent receives at least thirty
        (30) days' prior written notice (or such shorter period as may be permitted
        by the Agent) of such merger, (iv) no Default or Event of Default shall
        have occurred and be continuing either before or after giving effect to such
        transaction, and (v) the Lenders' rights in any Collateral, including,
        without limitation, the existence, perfection and priority of any Lien thereon,
        are not adversely affected by such merger or consolidation.

       

      6.4  Disposal
        of Assets.  Other
        than Permitted Dispositions, convey, sell, lease, license, assign, transfer,
        or
        otherwise dispose of (or enter into an agreement to convey, sell, lease,
        license, assign, transfer, or otherwise dispose of) any of Parent’s or its
        Subsidiaries assets, including the Stock of any of its
        Subsidiaries.

       

      6.5  Change
        of Jurisdiction, Corporate Name or Location.  (a)
        Change Borrower’s or any Guarantor’s  jurisdiction of organization
        and/or organization and/or organizational identification number (if any),
        (b)
        change its corporate name or (c) change its chief executive office, principal
        place of business (both in the United States and Canada), offices or warehouses
        or locations at which Collateral is held or stored, or the location of its
        records concerning the Collateral, in any case without at least thirty (30)
        days
        (or such shorter period as may be permitted by the Agent) prior written notice
        to Agent and after completing any action reasonably requested by Agent in
        connection therewith, including to continue the perfection of any Liens in
        favor
        of Agent, on behalf of Lenders, in any Collateral, has been completed or
        taken,
        and provided that any such new location shall be in the continental United
        States (or Canada, in the case of Parent). Without limiting the foregoing,
        neither Parent nor any Subsidiary shall change its location, name, identity
        or
        corporate structure in any manner which might make any financing or continuation
        statement filed in connection herewith seriously misleading within the meaning
        of Section 9-506 of the Code or any other then applicable provision of the
        Code
        except upon prior written notice to Agent and Lenders and after completing
        any
        action reasonably requested by the Agent in connection therewith, including
        to
        continue the perfection of any Liens in favor of Agent, on behalf of Lenders,
        in
        any Collateral.

       

      6.6  Nature
        of Business.  Make
        any change in the nature of the business of Parent and its Subsidiaries,
        taken
        as a whole,  as conducted on the Closing Date or, to the extent
        permitted hereunder, acquire any properties or assets that are not reasonably
        related to the conduct of such business activities.

       

      6.7  Prepayments
        and Amendments.  Except
        in connection with Refinancing Indebtedness permitted by Section
        6.1,

       

      (a)  optionally
        prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
        of
        Parent or its Subsidiaries, other than the Obligations in accordance with
        this
        Agreement or terminate any Swap Agreements as determined appropriate by Parent
        in the exercise of its commercially reasonable judgment; provided that Parent
        shall at all times remain in compliance with Section 6.24;

       

      (b)  make
        any
        payment on account of Indebtedness that has been contractually subordinated
        in
        right of payment if such payment is not permitted at such time under the
        subordination terms and conditions applicable thereto (for the avoidance
        of
        doubt, this provision shall apply to the payment by the Parent of amounts
        due
        under the Convertible Subordinated Notes with the effect that such payments
        may
        be made only to the extent permitted by the Subordination and Intercreditor
        Agreement; provided that, no repayment under or with respect to the Convertible
        Subordinated Notes shall be permitted if an Event of Default exists or, if
        after
        giving effect to such payment, an Event of Default would occur), or

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

      (c)  directly
        or indirectly, amend, modify, alter, increase, or change any of the terms
        or
        conditions of (i) any agreement, instrument, document, indenture, or other
        writing evidencing  or concerning Indebtedness permitted under Section
        6.1(b) or (c), or (ii) any other Material Contract except to the extent that
        such amendment, modification, alteration, increase, or change could not,
        individually or in the aggregate, reasonably be expected to result in a Material
        Adverse Change.

      
         

      

      6.8  Change
        of Control.  Cause,
        permit, or suffer, directly or indirectly, any Change of Control.

       

      6.9  [Intentionally
        Omitted].

       

      
        
          6.10  [Intentionally
            Omitted].

           

        

      

      6.11  Accounting
        Methods; Fiscal Year.  Modify
        or change its fiscal year or its method of accounting (other than as may
        be
        required to conform to GAAP).

       

      6.12  Investments.  Except
        for Permitted Investments, directly or indirectly, make or acquire any
        Investment or incur any liabilities (including contingent obligations) for
        or in
        connection with any Investment; provided, however, that (a) a Borrower may
        make
        loans and advances to a Guarantor and a Guarantor may make loans and advances
        to
        a Borrower or to another Guarantor, in each case, in the ordinary course
        of
        business, so long as such Person shall have executed and delivered to such
        lender a global demand note (collectively, the "Intercompany Notes") to evidence
        any such loan and advance by such Person to such other lender, which
        Intercompany Note shall be in form and substance reasonably satisfactory
        to
        Agent and shall be pledged and delivered to Agent in accordance with the
        terms
        of the Security Agreement, and (b) Parent and its Subsidiaries shall not
        have
        Permitted Investments (other than in the Cash Management Accounts) in Deposit
        Accounts or Securities Accounts in an aggregate amount in excess of Fifty
        Thousand Dollars ($50,000) at any one time unless Parent or its Subsidiary,
        as
        applicable, and the applicable securities intermediary or bank have entered
        into
        Control Agreements governing such Permitted Investments in order to perfect
        (and
        further establish) Agent’s Liens in such Permitted Investments. Subject to
        clause (b) of the foregoing proviso, Borrower shall not and shall not permit
        its
        Subsidiaries and shall not cause Parent to establish or maintain any Deposit
        Account or Securities Account unless Agent shall have received a Control
        Agreement in respect of such Deposit Account or Securities Account.

       

      6.13  Transactions
        with Affiliates.  Directly
        or indirectly enter into or permit to exist any transaction with any Affiliate
        of Parent or any of its Subsidiaries that is not a Loan Party except
        for:

       

      (a)  transactions
        (other than the payment of management, consulting, monitoring, or advisory
        fees)
        between Parent or its Subsidiaries, on the one hand, and any Affiliate of
        Parent
        or its Subsidiaries, on the other hand, so long as such transactions (i)
        have
        individually a value of less than Two Hundred Fifty Thousand Dollars ($250,000)
        , (ii)  are upon fair and reasonable terms and fully disclosed to the
        Agent and the Required Lenders, and (iii) are no less favorable to Parent
        or its Subsidiaries, as applicable, than would be obtained in an arm’s length
        transaction with a non-Affiliate;

       

      (b)  the
        payment of reasonable director, officer and employee compensation (including
        bonuses) and other reasonable benefits (including retirement, health, stock
        option and other benefit plans) and indemnification arrangements, each made
        in
        the ordinary course of business and consistent with industry
        practice;

       

      (c)  each
        of
        the transactions set forth on Schedule 6.13;

       

      (d)  distributions
        permitted in Section 6.10; and

       

      (e)  the
        consummation of Permitted Investments.

       

      6.14  Use
        of Proceeds.  Use
        the proceeds of the Advances and the Term Loan for any purpose other than
        (a) on
        the Closing Date, (i) to repay, in full, the outstanding principal, accrued
        interest, make-whole payment and accrued fees and expenses owing to Existing
        Lender and (ii)  to pay transactional fees, costs, and expenses
        incurred in connection with this Agreement, the other Loan Documents and
        the
        transactions contemplated hereby and thereby, and (b) thereafter, consistent
        with the terms and conditions hereof, for general corporate purposes, including
        the funding of capital expenditures and working capital.

       

      
        
          
          

        

        
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      6.15  Financial
        Covenants.

       

      (a)  Minimum
        EBITDA.  Fail to achieve EBITDA, calculated on the last day
        of the quarterly period indicated below, of at least the required amount
        set
        forth in the following table for the applicable quarterly period set forth
        opposite thereto:

       

      
        	
                Applicable
                  Amount

              	 	
                Applicable
                  Period

              
	$	
                12,750,000

              	 	
                For
                  the quarter ending
                  March 31, 2008

              
	$	
                16,600,000

              	 	
                For
                  the quarter ending
                  June 30, 2008

              
	$	
                20,400,000

              	 	
                For
                  the quarter ending
                  September 30, 2008

              
	$	
                23,300,000

              	 	
                For
                  the quarter ending
                  December 31, 2008

              
	$	
                28,300,000

              	 	
                For
                  the quarter ending
                  March 31, 2009

              
	$	
                32,300,000

              	 	
                For
                  the quarter ending
                  June 30, 2009

              
	$	
                37,300,000

              	 	
                For
                  the quarter ending
                  September 30, 2009, and for each quarter ending
                  thereafter

              

      

       

      (b)  Minimum
        Average Daily Production.  Fail to achieve minimum average
        daily production for Borrower and its Subsidiaries for any quarterly period
        indicated below, of at least the required amount set forth in the following
        table for the applicable quarterly period set forth opposite
        thereto:

       

      
        	
                Applicable
                  Amount

              	 	
                Applicable
                  Period

              
	 	
                16,800

              	 	
                For
                  the quarter ending
                  March 31, 2008

              
	 	
                23,100

              	 	
                For
                  the quarter ending
                  June 30, 2008

              
	 	
                28,500

              	 	
                For
                  the quarter ending
                  September 30, 2008

              
	 	
                30,200

              	 	
                For
                  the quarter ending
                  December 31, 2008

              
	 	
                29,400

              	 	
                For
                  the quarter ending
                  March 31, 2009

              
	 	
                34,600

              	 	
                For
                  the quarter ending
                  June 30, 2009

              
	 	
                40,600

              	 	
                For
                  the quarter ending
                  September 30, 2009, and for each quarter ending
                  thereafter

              

      

       

      ;
        provided that if a Force Majeure Event occurs during any quarterly period
        indicated above, for purposes of calculating the Minimum Average Daily
        Production, the Borrower shall be entitled to exclude the days during which
        such
        Force Majeure Event was in existence up to an aggregate of forty-five (45)
        days
        per Force Majeure Event.

       

      (c)  Minimum
        Asset Coverage Ratio.  Fail
        to achieve a minimum Asset Coverage Ratio, calculated on the last day of
        each
        calendar quarter, of at least 1.60:1.00, based on the Total Reserve Value
        reflected in the most recently delivered report by Borrower.

       

      (d)  Interest
        Coverage Ratio.  Have an Interest
        Coverage Ratio, calculated on the last day of the quarterly period indicated
        below, of not less than the required amount set forth in the following table
        for
        the applicable quarterly period set forth opposite thereto:

       

      
        	
                Applicable
                  Ratio

              	 	
                Applicable
                  Period

              
	
                2.50:1.00

              	 	
                For
                  the quarter ending
                  March 31, 2008

              
	
                2.75:1.00

              	 	
                For
                  the quarter ending
                  June 30, 2008

              
	
                3.00:1.00

              	 	
                For
                  the quarter ending
                  September 30, 2008

              
	
                3.25:1.00

              	 	
                For
                  the quarter ending
                  December 31, 2008

              
	
                3.50:1.00

              	 	
                For
                  the quarter ending
                  March 31, 2009, and for each quarter ending
                  thereafter

              

      

      

      (e)  Leverage
        Ratio.  Have a Leverage Ratio, calculated on the last day of
        the quarterly period indicated below, greater than the applicable ratio set
        forth in the following table for the applicable quarterly period set forth
        opposite thereto:

       

      
        	
                Applicable
                  Ratio

              	 	
                Applicable
                  Period

              
	
                4.30:1.00

              	 	
                For
                  the quarter ending
                  March 31, 2008

              
	
                3.30:1.00

              	
                 

              	
                For
                  the quarter ending
                  June 30, 2008

              
	
                2.70:1.00

              	 	
                For
                  the quarter ending
                  September 30, 2008

              
	
                2.50:1.00

              	 	
                For
                  the quarter ending
                  December 31, 2008, and for each quarter ending
                  thereafter

              

      

      

      6.16  Forward
        Sales. 
        Except in accordance with the ordinary course of the Oil and Gas Business
        and
        except as required under Section 5.22, enter into or permit to exist any
        advance payment agreement or other arrangement pursuant to which Borrower
        or any
        of its Subsidiaries, having received full or substantial payment of the purchase
        price for a specified quantity of Hydrocarbons upon entering such agreement
        or
        arrangement, is required to deliver, in one or more installments subsequent
        to
        the date of such agreement or arrangement, such quantity of Hydrocarbons
        pursuant to and during the terms of such agreement or arrangement.

       

      
        
          
          

        

        
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      6.17  Oil
        and Gas Imbalances. 
        Enter into any contracts or agreements which guarantee production of
        Hydrocarbons (other than Swap Agreements otherwise permitted hereunder) or
        hereafter allow gas imbalances, take-or-pay or other prepayment with respect
        to
        its Oil and Gas Properties which would require Borrower or any of its
        Subsidiaries to deliver Hydrocarbons produced on Oil and Gas Properties at
        some
        future time without then or thereafter receiving full payment therefor to
        exceed, during any monthly period, two percent (2%) of the current aggregate
        monthly gas production for such monthly period from the Oil and Gas Properties
        of Borrower and its Subsidiaries.

       

      6.18  Marketing
        Activities.

       

      (a)  Neither
        Borrower nor any of its Subsidiaries will engage in marketing activities
        for any
        Hydrocarbons or enter into any contracts related thereto other than (i)
        contracts for the sale of Hydrocarbons scheduled or reasonably estimated
        to be
        produced from their Proved Oil and Gas Properties during the period of such
        contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
        estimated to be produced from Proved Oil and Gas Properties of third parties
        during the period of such contract associated with the Oil and Gas Properties
        of
        Borrower and its Subsidiaries that Borrower (or its Subsidiaries, as applicable)
        has the right to market pursuant to joint operating agreements, unitization
        agreements or other similar contracts that are usual and customary in the
        oil
        and gas business and (iii) other contracts for the purchase and/or sale of
        Hydrocarbons of third parties (A) that have generally offsetting provisions
        (i.e., corresponding pricing mechanics, delivery dates and points and volumes)
        such that no “position” is taken and (B) for which appropriate credit support
        has been taken to alleviate the material credit risks of the counterparty
        thereto.

       

      (b)  All
        Hydrocarbon produced from the Oil and Gas Properties of Borrower and its
        Subsidiaries shall be marketed on an arm’s length basis using one or more
        Persons that are not Affiliates of Borrower.

       

      6.19  Sale-Leasebacks.  Engage
        in any sale-leaseback, synthetic lease or similar transaction involving any
        of
        its assets.

       

      6.20  Cancellation
        of Indebtedness.  Cancel
        any claim or debt owing to it, except for reasonable consideration negotiated
        on
        an arm’s-length basis.

       

      6.21  No
        Amendment of Governing Documents; Intercompany
        Note.
        (a)
        Amend, modify, supplement, restate or otherwise change its Governing Documents
        to the extent adverse to the rights or interests of the Lenders without the
        prior written consent of the Agent or (b) add a Person other than a Loan
        Party
        to the Intercompany Note.

       

      6.22  No
        Impairment of Intercompany Transfers; Negative Pledge. (a)
        Directly or indirectly enter into or become bound by any agreement, instrument,
        indenture or other obligation (other than this Agreement and the other Loan
        Documents) which directly or indirectly restricts, prohibits or requires
        the
        consent of any Person with respect to the payment of dividends or distributions
        or the making or repayment of intercompany loans by a Subsidiary of Borrower
        that is not a Guarantor to Borrower or (b) directly or indirectly enter into,
        incur or permit to exist any agreement or other arrangement (other than (i)
        this
        Agreement, (ii) Permitted Liens under Permitted Purchase Money Indebtedness
        permitted under this Agreement, (iii) restrictions on assignment contained
        in
        licenses, leases and other contracts entered into in the ordinary course
        of
        business, (iv) restrictions and conditions existing on the date of this
        Agreement identified on Schedule 6.22, and (v) customary restrictions and
        conditions contained in agreements relating to the sale of a Subsidiary pending
        such sale, provided such restrictions and conditions apply only to the
        Subsidiary that its to be sold and such sale is permitted hereunder) that
        prohibits, restricts or imposes any condition upon the ability of such Borrower
        or Subsidiary to create, incur or permit to exist any Lien upon any of its
        property or assets.

       

      6.23  [Intentionally
        Omitted]. 

       

      6.24  Swap
        Agreements.  Enter
        into any Swap Agreements with any Person other than (a) Swap Agreements in
        respect of commodities (i) with an Approved Counterparty and (ii) the notional
        volumes for which (when aggregated with other commodity Swap Agreements then
        in
        effect other than basis differential swaps on volumes already hedged pursuant
        to
        other Swap Agreements) do not exceed, as of January 1, 2008, for (A) natural
        gas, ninety percent (90%) of the reasonably anticipated projected production
        from Proved Developed Producing Reserves in the most recent Reserve Report
        delivered pursuant to Section 5.20 for each month during the period
        commencing on such date and ending on the date  twelve (12) months
        thereafter, and for each month during any period after such twelve (12)-month
        period, eighty-five percent (85%) of the reasonably anticipated projected
        production from such Proved Developed Producing Reserves in the most recent
        Reserve Report delivered pursuant to Section 5.20 for each month during such
        period, and (B) crude oil, ninety percent (90%) of the reasonably anticipated
        projected production from Proved Developed Producing Reserves  in the
        most recent Reserve Report delivered pursuant to Section 5.20 for each
        month during the period commencing on such date and ending on the date twelve
        (12) months thereafter, and for each month during any period after such twelve
        (12)-month period, eighty-five percent (85%) of the reasonably anticipated
        projected production from Proved Developed Producing Reserves for each month
        during such period; provided, that Borrower shall not enter into any
        additional Swap Agreements with respect to crude oil for which payment dates
        occur in 2007 or which relate to periods in 2007, (b) Swap Agreements in
        respect
        of interest rates with an Approved Counterparty, as follows:  (i) Swap
        Agreements effectively converting interest rates from fixed to floating,
        the
        notional amounts of which (when aggregated with all other Swap Agreements
        of
        Borrower and its Subsidiaries then in effect effectively converting interest
        rates from fixed to floating) do not exceed fifty percent (50%) of the then
        outstanding principal amount of Borrower’s Indebtedness for borrowed money which
        bears interest at a fixed rate and (ii) Swap Agreements effectively converting
        interest rates from floating to fixed, the notional amounts of which (when
        aggregated with all other Swap Agreements of Borrower and its Subsidiaries
        then
        in effect effectively converting interest rates from floating to fixed) do
        not
        exceed seventy-five percent (75%) of the then outstanding principal amount
        of
        Borrower’s Indebtedness for borrowed money which bears interest at a floating
        rate and (c) Swap Agreements listed on Schedule 4.24
        hereto.  In no event shall any Swap Agreement contain any requirement,
        agreement or covenant for Borrower or any Subsidiary to post collateral or
        margin to secure their obligations under such Swap Agreement or to cover
        market
        exposures except to the extent permitted by Section 6.2.

       

      
        
          
          

        

        
          -28-

          
            

          

        

        
          
          

        

      

      7.  EVENTS
        OF DEFAULT.

       

      Any
        one
        or more of the following events shall constitute an event of default (each,
        an
“Event of Default”) under this Agreement:

       

      7.1  If
        Borrower fails to pay when due and payable, (a) all or any portion of the
        Obligations consisting of scheduled interest or fees and such failure continues
        for three (3) Business Days, (b) other charges due the Lender Group,
        reimbursement of Lender Group Expenses, or other amounts (other than any
        portion
        thereof constituting principal) constituting Obligations (including any portion
        thereof that accrues after the commencement of an Insolvency Proceeding,
        regardless of whether allowed or allowable in whole or in part as a claim
        in any
        such Insolvency Proceeding) within five (5) Business Days after written notice
        of such failure, or (c) all or any portion of the principal of the
        Obligations;

       

      7.2  If
        Parent
        or any of its Subsidiaries:

       

      (a)  fails
        to
        perform or observe any covenant or other agreement contained in any of
Sections 2.7, 5.2, 5.3, 5.4, 5.5, 5.8,
5.11 (as to Borrower’s existence
        only), 5.13,
5.14, 5.15, 5.16, 5.20, 5.21,
5.22 and
Section
        6 of this Agreement or Section 6 of the
        Security Agreement;

       

      (b)  fails
        to
        perform or observe any covenant or other agreement contained in any of
Sections 5.6, 5.7, 5.9, 5.10, 5.11
        (except as set forth in Section 7.2(a) above), and 5.12 of this
        Agreement and such failure continues for a period of ten (10) days after
        the
        earlier of (i) the date on which such failure shall first become known to
        any
        Responsible Officer of Borrower or (ii) written notice thereof is given to
        Borrower by Agent; or

       

      (c)  fails
        to
        perform or observe any covenant or other agreement contained in this Agreement,
        or in any of the other Loan Documents, in each case, other than any such
        covenant or agreement that is the subject of another provision of this
Section 7 (in which event such other provision of this Section 7
        shall govern), and such failure continues for a period of twenty (20) Business
        Days after the earlier of (i) the date on which such failure shall first
        become
        known to any Responsible Officer of Borrower or (ii) written notice thereof
        is
        given to Borrower by Agent;

       

      7.3  If
        any
        material portion of Parent’s or any of its Subsidiaries’ assets is attached,
        seized, subjected to a writ or distress warrant, or is levied upon, or comes
        into the possession of any third Person and the same is not discharged before
        the earlier of thirty (30) days after the date it first arises or five (5)
        days
        prior to the date on which such property or asset is subject to forfeiture
        by
        Borrower or the applicable Subsidiary;

       

      7.4  If
        an
        Insolvency Proceeding is commenced by Parent or any of its
        Subsidiaries;

       

      7.5  If
        an
        Insolvency Proceeding is commenced against Parent or any of its Subsidiaries
        and
        any of the following events occur: (a) Parent or such Subsidiary consents
        to the
        institution of such Insolvency Proceeding against it, (b) the petition
        commencing the Insolvency Proceeding is not timely controverted, (c) the
        petition commencing the Insolvency Proceeding is not dismissed within sixty
        (60)
        calendar days of the date of the filing thereof, (d) an interim trustee is
        appointed to take possession of all or any substantial portion of the properties
        or assets of, or to operate all or any substantial portion of the business
        of,
        Parent or any of its Subsidiaries, or (e) an order for relief shall have
        been
        issued or entered therein;

       

      7.6  If
        Parent
        or any of its Subsidiaries is enjoined, restrained, or in any way prevented
        by
        court order from continuing to conduct all or any material part of its business
        affairs;

       

      7.7  If
        one or
        more judgments, orders, or awards involving an aggregate amount of Two Hundred
        Fifty Thousand Dollars ($250,000), or more (except to the extent covered
        by
        insurance pursuant to which the insurer has not disclaimed liability) shall
        be
        entered or filed against Parent or any of its Subsidiaries or with respect
        to
        any of their respective assets, and the same is not released, discharged,
        bonded
        against, or stayed pending appeal before the earlier of sixty (60) days after
        the date it first arises or five (5) days prior to the date on which such
        asset
        is subject to being forfeited by Borrower or the applicable
        Subsidiary;

       

      7.8  If
        there
        is a default in one or more agreements to which Parent or any of its
        Subsidiaries is a party with one or more third Persons relative to Parent’s or
        any of its Subsidiaries’ Indebtedness involving an aggregate amount of Two
        Hundred Fifty Thousand Dollars ($250,000) or more, and such default (i) occurs
        at the final maturity of the obligations thereunder, or (ii) results in a
        right
        by such third Person(s), irrespective of whether exercised, to accelerate
        the
        maturity of Borrower’s or the applicable Subsidiary’s obligations thereunder
        (for the avoidance of doubt, any default or event of default arising under
        the
        Convertible Subordinated Notes shall constitute an Event of Default
        hereunder);

       

      7.9  If
        any
        warranty, representation, statement, or certification made herein or in any
        other Loan Document or delivered to Agent or any Lender in connection with
        this
        Agreement or any other Loan Document proves to be untrue in any material
        respect
        (except that such materiality qualifier shall not be applicable to any
        representations and warranties that already are qualified or modified by
        materiality in the text thereof) as of the date of issuance or making or
        deemed
        making thereof;

       

      7.10  If
        the
        obligation of any Guarantor under the Guaranty is limited or terminated by
        operation of law or by such Guarantor, or any such Guarantor becomes the
        subject
        of an Insolvency Proceeding;

       

      7.11  If
        the
        Security Agreement or any other Loan Document that purports to create a Lien
        shall, for any reason, fail or cease to create a valid and perfected and,
        except
        to the extent permitted by the terms hereof or thereof, first priority Lien
        on
        or security interest in the Collateral covered hereby or thereby, except
        as a result of a disposition of the applicable Collateral in a transaction
        permitted under this Agreement; 

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

      7.12  If
        any
        provision of any Loan Document shall at any time for any reason be declared
        to
        be null and void, or the validity or enforceability thereof shall be contested
        by Parent or its Subsidiaries, or a proceeding shall be commenced by Parent
        or
        its Subsidiaries, or by any Governmental Authority having jurisdiction over
        Parent or its Subsidiaries, seeking to establish the invalidity or
        unenforceability thereof, or Parent or its Subsidiaries shall deny that Parent
        or its Subsidiaries has any liability or obligation purported to be created
        under any Loan Document;

       

      7.13  The
        loss,
        suspension or revocation of, or failure to renew, any license or permit now
        held
        or hereafter acquired by Parent or any of its Subsidiaries, if such loss,
        suspension, revocation or failure to renew could reasonably be expected to
        result in a Material Adverse Change;

       

      7.14  The
        indictment of Parent or any Subsidiary thereof under any criminal statute,
        or
        commencement of criminal or civil proceedings against Parent or any such
        Subsidiary, pursuant to which statute or proceedings the penalties or remedies
        sought or available include forfeiture to any Governmental Authority of any
        portion of the property of such Person which would result in a Material Adverse
        Change;

       

      7.15  If
        (i) an
        ERISA Event shall occur with respect to a Pension Plan that has resulted
        or
        could reasonably be expected to result in liability of Parent or the Guarantors,
        either individually or in the aggregate, under Title IV of ERISA to the Pension
        Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
        One
        Hundred Thousand Dollars ($100,000); (ii) the aggregate amount of Unfunded
        Pension Liability among all Pension Plans at any time exceeds One Hundred
        Thousand Dollars ($100,000); or (iii) Parent or the Guarantor or any ERISA
        Affiliate shall fail to pay when due, after the expiration of any applicable
        grace period, any installment payment with respect to its withdrawal liability
        under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount
        in
        excess of One Hundred Thousand Dollars ($100,000); or

       

      7.16  Any
        Material Adverse Change shall have occurred. 

       

      8.  THE
        LENDER GROUP’S RIGHTS AND REMEDIES.

       

      8.1  Rights
        and Remedies.  Upon
        the occurrence, and during the continuation, of an Event of Default, Agent
        at
        the request of the Required Lenders for the benefit of the Lender Group shall
        without notice or demand, all of which are authorized by Borrower:

       

      (a)  Declare
        all or any portion of the Obligations, whether evidenced by this Agreement,
        by
        any of the other Loan Documents, or otherwise, immediately due and
        payable;

       

      (b)  Cease
        advancing money or extending credit to or for the benefit of Borrower under
        this
        Agreement, under any of the Loan Documents, or under any other agreement
        between
        Borrower and the Lender Group;

       

      (c)  Agent,
        on
        behalf of the Lender Group, may foreclose any or all of the Mortgages and
        sell
        the Real Property Collateral or Oil and Gas Properties or cause the Real
        Property Collateral or Oil and Gas Properties to be sold in accordance with
        the
        provisions of the Mortgages and applicable law, and exercise any and all
        other
        rights or remedies available to Agent, on behalf of the Lender Group, under
        the
        Mortgages, any of the other Loan Documents, at law or in equity with respect
        to
        the Collateral encumbered by the Mortgages;

       

      (d)  Terminate
        this Agreement and any of the other Loan Documents as to any future liability
        or
        obligation of the Lender Group, but without affecting any of Agent’s Liens in
        the Collateral and without affecting the Obligations; and

       

      (e)  The
        Lender Group shall have all other rights and remedies available at law or
        in
        equity or pursuant to any other Loan Document.

       

      The
        foregoing to the contrary notwithstanding, upon the occurrence of any Event
        of
        Default described in Section 7.4 or Section 7.5, in addition to
        the remedies set forth above, without any notice to Borrower or any other
        Person
        or any act by the Lender Group, the Commitments shall automatically terminate
        and the Obligations then outstanding, together with all accrued and unpaid
        interest thereon and all fees and all other amounts due under this Agreement
        and
        the other Loan Documents, shall automatically and immediately become due
        and
        payable, without presentment, demand, protest, or notice of any kind, all
        of
        which are expressly waived by Borrower.

       

      8.2  Remedies
        Cumulative .  The
        rights and remedies of the Lender Group under this Agreement, the other Loan
        Documents, and all other agreements shall be cumulative.  The Lender
        Group shall have all other rights and remedies not inconsistent herewith
        as
        provided under the Code, by law, or in equity.  No exercise by the
        Lender Group of one right or remedy shall be deemed an election, and no waiver
        by the Lender Group of any Event of Default shall be deemed a continuing
        waiver.  No delay by the Lender Group shall constitute a waiver,
        election, or acquiescence by it.

       

      9.  TAXES
        AND EXPENSES.

       

      If
        Borrower or its Subsidiaries fail to pay any monies (whether taxes, assessments,
        insurance premiums, or, in the case of leased properties or assets, rents
        or
        other amounts payable under such leases) due to third Persons, or fails to
        make
        any deposits or furnish any required proof of payment or deposit, all as
        required under the terms of this Agreement, then, Agent, in its sole discretion,
        may do any or all of the following:  (a) without prior notice to the
        Borrower, make payment of the same or any part thereof, (b) set up such reserves
        against the Borrowing Base or the Maximum Revolver Amount as Agent deems
        necessary to protect the Lender Group from the exposure created by such failure,
        or (c) in the case of the failure to comply with Section 5.8 hereof,
        obtain and maintain insurance policies of the type described in Section
        5.8 and take such action with respect to such policies as permitted pursuant
        to Section 5.8.  Any such amounts paid by Agent shall
        constitute Lender Group Expenses and any such payments shall not constitute
        an
        agreement by the Lender Group to make similar payments in the future or a
        waiver
        by the Lender Group of any Event of Default under this
        Agreement.  Agent need not inquire as to, or contest the validity of,
        any such expense, tax, or Lien and the receipt of the usual official notice
        for
        the payment thereof shall be conclusive evidence that the same was validly
        due
        and owing.

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

      10.  WAIVERS;
        INDEMNIFICATION.

       

      10.1  Demand;
        Protest; etc.  Borrower
        waives demand, protest, notice of protest, notice of default or dishonor,
        notice
        of payment and nonpayment, nonpayment at maturity, release, compromise,
        settlement, extension, or renewal of documents, instruments, chattel paper,
        and
        guarantees at any time held by the Lender Group on which Borrower may in
        any way
        be liable.

       

      10.2  The
        Lender Group’s Liability for Collateral.  Borrower
        hereby agrees that:  (a) so long as Agent complies with its
        obligations, if any, under the Code, the Lender Group shall not in any way
        or
        manner be liable or responsible for:  (i) the safekeeping of the
        Collateral, (ii) any loss or damage thereto occurring or arising in any manner
        or fashion from any cause, (iii) any diminution in the value thereof, or
        (iv)
        any act or default of any carrier, warehouseman, bailee, forwarding agency,
        or
        other Person, and (b) all risk of loss, damage, or destruction of the Collateral
        shall be borne by Borrower.

       

      10.3  Indemnification.  Borrower
        shall pay, indemnify, defend, and hold Agent-Related Persons, the Lender-Related
        Persons, and each Participant (each, an “Indemnified Person”) harmless
        (to the fullest extent permitted by law) from and against any and all claims,
        demands, suits, actions, investigations, proceedings, liabilities, fines,
        costs,
        penalties, and damages, and all reasonable out of pocket fees and disbursements
        of attorneys, experts, or consultants and all other costs and expenses actually
        incurred in connection therewith or in connection with the enforcement of
        this
        indemnification (as and when they are incurred and irrespective of whether
        suit
        is brought), at any time asserted against, imposed upon, or incurred by any
        of
        them (a) in connection with or as a result of or related to the execution,
        delivery, enforcement, performance, or administration (including any
        restructuring or workout with respect hereto) of this Agreement, any of the
        other Loan Documents, or the transactions contemplated hereby or thereby
        or the
        monitoring of Borrower’s and its Subsidiaries’ compliance with the terms of the
        Loan Documents, (b) with respect to any investigation, litigation, or
        proceeding related to this Agreement, any other Loan Document, or the use
        of the
        proceeds of the credit provided hereunder (irrespective of whether any
        Indemnified Person is a party thereto), or any act, omission, event, or
        circumstance in any manner related thereto, and (c) in connection with or
        arising out of any presence or Release of Hazardous Materials, any Environmental
        Actions, any Environmental Liabilities or any Response Actions related to
        any
        assets or properties of Borrower or any of its Subsidiaries (each and all
        of the
        foregoing, the “Indemnified Liabilities”).  The foregoing to
        the contrary notwithstanding, Borrower shall have no obligation to any
        Indemnified Person under this Section 10.3 with respect to any
        Indemnified Liability that a court of competent jurisdiction finally determines
        to have resulted from the gross negligence or willful misconduct of such
        Indemnified Person.  This provision shall survive the termination of
        this Agreement and the repayment of the Obligations.  If any
        Indemnified Person makes any payment to any other Indemnified Person with
        respect to an Indemnified Liability as to which Borrower was required to
        indemnify the Indemnified Person receiving such payment, the Indemnified
        Person
        making such payment is entitled to be indemnified and reimbursed by Borrower
        with respect thereto.  WITHOUT LIMITATION, THE FOREGOING
        INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
        LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY
        NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
        PERSON.

       

      
        
          
          

        

        
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      11.  NOTICES.

       

      Unless
        otherwise provided in this Agreement, all notices or demands by Borrower
        or
        Agent to the other relating to this Agreement or any other Loan Document
        shall
        be in writing and (except for financial statements and other informational
        documents which may be sent by first-class mail, postage prepaid) shall be
        personally delivered or sent by registered or certified mail (postage prepaid,
        return receipt requested), overnight courier, electronic mail (at such email
        addresses as Borrower or Agent, as applicable, may designate to each other
        in
        accordance herewith), or telefacsimile to Borrower or Agent, as the case
        may be,
        at its address set forth below:

       

      

      
        	
                If
                  to Borrower:

              	
                Storm
                  Cat Energy (USA) Corporation

              
	
                 

              	
                1125
                  17th
                  St.,
                  Suite 2310

              
	 	
                Denver,
                  Colorado 80202

              
	 	
                Attn:
                  Paul Wiesner

              
	 	
                Fax
                  No.: (303) 991-5075

              
	 	 
	
                with
                  copies to:

              	
                Hogan
                  & Hartson LLP

              
	 	
                One
                  Tabor Center, Suite 1500

              
	 	
                1200
                  Seventeenth Street

              
	 	
                Denver,
                  Colorado 80202

              
	 	
                Attn:
                  Richard Mattera, Esq.

              
	 	
                Fax
                  No.: (303) 899-7333

              
	 	 
	
                If
                  to Agent:

              	
                Wells
                  Fargo Foothill, LLC

              
	 	
                1100
                  Abernathy Road, Suite 1600

              
	 	
                Atlanta,
                  Georgia  30328

              
	 	
                Attn:
                  Business Finance Manager

              
	 	
                Fax
                  No.: (770) 804-0785

              
	 	 
	
                with
                  copies to:

              	
                Schulte
                  Roth & Zabel LLP

              
	 	
                919
                  Third Avenue

              
	 	
                New
                  York, New York  10022

              
	 	
                Attn:  Kirby
                  Chin, Esq.

              
	 	
                Fax
                  No.: (212) 593-5955

              
	 	 
	
                If
                  to Lenders:

              	
                To
                  the addresses set forth on the signature pages under each Lender’s
                  name.

              
	 	 
	
                with
                  copies to:

              	
                Proskauer
                  Rose LLP

              
	 	
                One
                  International Place

              
	 	
                Boston, Massachusetts 02110-2600

              
	 	
                Attn:  Steven
                  M. Ellis, Esq.

              
	 	
                Fax
                  No.: (617) 526-9899

              

      

       

      Agent,
        any Lender and Borrower may change the address at which they are to receive
        notices hereunder, by notice in writing in the foregoing manner given to
        the
        other party.  All notices or demands sent in accordance with this
Section 11, other than notices by Agent in connection with enforcement
        rights against the Collateral under the provisions of the Code, shall be
        deemed
        received on the earlier of the date of actual receipt or three (3) Business
        Days
        after the deposit thereof in the mail.  Borrower acknowledges and
        agrees that notices sent by the Lender Group in connection with the exercise
        of
        enforcement rights against Collateral under the provisions of the Code shall
        be
        deemed sent when deposited in the mail or personally delivered, or, where
        permitted by law, transmitted by telefacsimile or any other method set forth
        above.

       

      
        
          
          

        

        
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      12.  CHOICE
        OF LAW AND VENUE; JURY TRIAL WAIVER.

       

      (a)  THE
        VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
        PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER
        LOAN
        DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
        AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS
        ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
        UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
        OF
        NEW YORK.

       

      (b)  THE
        PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
        THIS
        AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY
        IN THE
        STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED
        IN
        THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
        ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
        BE
        BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS
        TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
        FOUND.  BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE
        EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
        THE
        DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
        VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
        12(b).

       

      (c)  BORROWER
        AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS
        TO A
        JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
        OF
        THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
        CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON
        LAW OR
        STATUTORY CLAIMS.  BORROWER AND EACH MEMBER OF THE LENDER GROUP
        REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
        WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
        COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
        FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

       

      13.  ASSIGNMENTS
        AND PARTICIPATIONS; SUCCESSORS.

       

      13.1  Assignments
        and Participations.

       

      (a)  Any
        Lender may at any time assign and delegate to one or more assignees (each
        an
“Assignee”) all or any portion of the Obligations, the Commitments and
        the other rights and obligations of such Lender hereunder and under the other
        Loan Documents, in a minimum amount (unless waived by Agent and, so long
        as no
        Event of Default shall have occurred and be continuing, Borrower) of Two
        Million
        Five Hundred Thousand Dollars ($2,500,000) (except such minimum amount shall
        not
        apply to (x) an assignment or delegation by any Lender to any other Lender or an
        Affiliate of any Lender or an Approved Fund, (y) a group of new Lenders,
        each of
        whom is an Affiliate of each other or a fund or account managed by any such
        new
        Lender or an Affiliate of such new Lender to the extent that the aggregate
        amount to be assigned to all such new Lenders is at least Three Million Dollars
        ($3,000,000) or (z) an Eligible Assignee); provided, however, that
        Borrower and Agent may continue to deal solely and directly with such Lender
        in
        connection with the interest so assigned to an Assignee until (i) written
        notice
        of such assignment, together with payment instructions, addresses, and related
        information with respect to the Assignee, have been given to Borrower and
        Agent
        by such Lender and the Assignee, (ii) such Lender and its Assignee have
        delivered to Borrower and Agent an Assignment and Acceptance and Agent has
        notified the assigning Lender of its receipt thereof in accordance with
Section 13.1(b), and (iii) unless waived by Agent, the assigning Lender
        or Assignee has paid to Agent for Agent’s separate account a processing fee in
        the amount of Three Thousand Five Hundred Dollars ($3,500).  So long
        as no Event of Default shall have occurred and be continuing, any proposed
        assignment pursuant to this Section 13.1(a) other than to an Eligible
        Assignee shall be subject to the consent of Borrower, which consent shall
        not be
        unreasonably withheld or delayed.

       

      (b)  From
        and
        after the date that Agent notifies the assigning Lender (with a copy to
        Borrower) that it has received an executed Assignment and Acceptance and,
        if
        applicable, payment of the required processing fee, (i) the Assignee thereunder
        shall be a party hereto and, to the extent that rights and obligations hereunder
        have been assigned to it pursuant to such Assignment and Acceptance, shall
        have
        the rights and obligations of a Lender under the Loan Documents, and (ii)
        the
        assigning Lender shall, to the extent that rights and obligations hereunder
        and
        under the other Loan Documents have been assigned by it pursuant to such
        Assignment and Acceptance, relinquish its rights (except with respect to
        Section 10.3 hereof) and be released from any future obligations under
        this Agreement (and in the case of an Assignment and Acceptance covering
        all or
        the remaining portion of an assigning Lender’s rights and obligations under this
        Agreement and the other Loan Documents, such Lender shall cease to be a party
        hereto and thereto), and such assignment shall effect a novation among Borrower,
        the assigning Lender, and the Assignee; provided, however, that
        nothing contained herein shall release any assigning Lender from obligations
        that survive the termination of this Agreement, including such assigning
        Lender’s obligations under Section 15 and Section 17.9(a) of this
        Agreement.

       

      (c)  By
        executing and delivering an Assignment and Acceptance, the assigning Lender
        thereunder and the Assignee thereunder confirm to and agree with each other
        and
        the other parties hereto as follows:  (i) other than as provided in
        such Assignment and Acceptance, such assigning Lender makes no representation
        or
        warranty and assumes no responsibility with respect to any statements,
        warranties or representations made in or in connection with this Agreement
        or
        the execution, legality, validity, enforceability, genuineness, sufficiency
        or
        value of this Agreement or any other Loan Document furnished pursuant hereto,
        (ii) such assigning Lender makes no representation or warranty and assumes
        no
        responsibility with respect to the financial condition of Borrower or the
        performance or observance by Borrower of any of its obligations under this
        Agreement or any other Loan Document furnished pursuant hereto, (iii) such
        Assignee confirms that it has received a copy of this Agreement, together
        with
        such other documents and information as it has deemed appropriate to make
        its
        own credit analysis and decision to enter into such Assignment and Acceptance,
        (iv) such Assignee will, independently and without reliance upon Agent, such
        assigning Lender or any other Lender, and based on such documents and
        information as it shall deem appropriate at the time, continue to make its
        own
        credit decisions in taking or not taking action under this Agreement, (v)
        such
        Assignee appoints and authorizes Agent to take such actions and to exercise
        such
        powers under this Agreement as are delegated to Agent, by the terms hereof,
        together with such powers as are reasonably incidental thereto, and (vi)
        such
        Assignee agrees that it will perform all of the obligations which by the
        terms
        of this Agreement are required to be performed by it as a Lender.

       

      
        
          
          

        

        
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      (d)  Immediately
        upon Agent’s receipt of the required processing fee, if applicable, and delivery
        of notice to the assigning Lender pursuant to Section 13.1(b), this
        Agreement shall be deemed to be amended to the extent, but only to the extent,
        necessary to reflect the addition of the Assignee and the resulting adjustment
        of the Commitments arising therefrom.  The Commitment allocated to
        each Assignee shall reduce such Commitments of the assigning Lender pro
        tanto.

       

      (e)  Any
        Lender may at any time sell to one or more commercial banks, financial
        institutions, or other Persons (a “Participant”) participating interests
        in all or any portion of its Obligations, its Commitment, and the other rights
        and interests of that Lender (the “Originating Lender”) hereunder and
        under the other Loan Documents; provided, however, that (i) the
        Originating Lender shall remain a “Lender” for all purposes of this Agreement
        and the other Loan Documents and the Participant receiving the participating
        interest in the Obligations, the Commitments, and the other rights and interests
        of the Originating Lender hereunder shall not constitute a “Lender” hereunder or
        under the other Loan Documents and the Originating Lender’s obligations under
        this Agreement shall remain unchanged, (ii) the Originating Lender shall
        remain
        solely responsible for the performance of such obligations, (iii) Borrower,
        Agent, and the Lenders shall continue to deal solely and directly with the
        Originating Lender in connection with the Originating Lender’s rights and
        obligations under this Agreement and the other Loan Documents, (iv) no Lender
        shall transfer or grant any participating interest under which the Participant
        has the right to approve any amendment to, or any consent or waiver with
        respect
        to, this Agreement or any other Loan Document, except to the extent such
        amendment to, or consent or waiver with respect to this Agreement or of any
        other Loan Document would (A) extend the final maturity date of the
        Obligations hereunder in which such Participant is participating,
        (B) reduce the interest rate applicable to the Obligations hereunder in
        which such Participant is participating, (C) release all or substantially
        all of the Collateral or guaranties (except to the extent expressly provided
        herein or in any of the Loan Documents) supporting the Obligations hereunder
        in
        which such Participant is participating, (D) postpone the payment of, or
        reduce
        the amount of, the interest or fees payable to such Participant through such
        Lender, or (E) change the amount or due dates of scheduled principal repayments
        or prepayments or premiums, and (v) all amounts payable by Borrower hereunder
        shall be determined as if such Lender had not sold such participation, except
        that, if amounts outstanding under this Agreement are due and unpaid, or
        shall
        have been declared or shall have become due and payable upon the occurrence
        of
        an Event of Default, each Participant shall be deemed to have the right of
        set
        off in respect of its participating interest in amounts owing under this
        Agreement to the same extent as if the amount of its participating interest
        were
        owing directly to it as a Lender under this Agreement.  The rights of
        any Participant only shall be derivative through the Originating Lender with
        whom such Participant participates and no Participant shall have any rights
        under this Agreement or the other Loan Documents or any direct rights as
        to the
        other Lenders, Agent, Borrower, the Collections of Borrower or its Subsidiaries,
        the Collateral, or otherwise in respect of the Obligations.  No
        Participant shall have the right to participate directly in the making of
        decisions by the Lenders among themselves.  The provisions of this
Section 13.1(e) are solely for the benefit of the Lender Group and
        Borrower shall not have any rights as third party beneficiaries of any such
        provisions.

       

      (f)  In
        connection with any such assignment or participation or proposed assignment
        or
        participation, a Lender may, subject to the provisions of Section 17.9,
        disclose all documents and information which it now or hereafter may have
        relating to Borrower and its Subsidiaries and their respective
        businesses.

       

      (g)  Any
        other
        provision in this Agreement notwithstanding, any Lender may at any time create
        a
        security interest in, or pledge, all or any portion of its rights under and
        interest in this Agreement in favor of any Federal Reserve Bank in accordance
        with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation
        31 CFR
§203.24, and such Federal Reserve Bank may enforce such pledge or security
        interest in any manner permitted under applicable law.

       

      13.2  Successors.  This
        Agreement shall bind and inure to the benefit of the respective successors
        and
        assigns of each of the parties; provided, however, that Borrower
        may not assign this Agreement or any rights or duties hereunder without the
        Lenders’ prior written consent and any prohibited assignment shall be
        absolutely void ab initio.  No consent to assignment by the
        Lenders shall release Borrower from its Obligations.  A Lender may
        assign this Agreement and the other Loan Documents and its rights and duties
        hereunder and thereunder pursuant to Section 13.1 hereof.

       

      14.  AMENDMENTS;
        WAIVERS.

       

      14.1  Amendments
        and Waivers.  No
        amendment or waiver of any provision of this Agreement or any other Loan
        Document (other than Bank Product Agreements), and no consent with respect
        to
        any departure by Borrower therefrom, shall be effective unless the same shall
        be
        in writing and signed by the Required Lenders (or by Agent at the written
        request of the Required Lenders) and Borrower and then any such waiver or
        consent shall be effective, but only in the specific instance and for the
        specific purpose for which given; provided, however, that no such
        waiver, amendment, or consent shall, unless in writing and signed by all
        of the
        Lenders directly affected thereby and Borrower, do any of the
        following:

       

      (a)  increase
        or extend any Commitment of any Lender,

       

      (b)  postpone
        or delay any date fixed by this Agreement or any other Loan Document for
        any
        payment of principal, interest, fees, or other amounts due hereunder or under
        any other Loan Document,

       

      (c)  reduce
        the principal of, or the rate of interest on, any loan or other extension
        of
        credit hereunder, or reduce any fees or other amounts payable hereunder or
        under
        any other Loan Document,

       

      (d)  change
        the Pro Rata Share that is required to take any action hereunder,

       

      (e)  amend
        or
        modify this Section or any provision of this Agreement providing for consent
        or
        other action by all Lenders,

       

      (f)  other
        than as permitted by Section 15.11, release Agent’s Lien in and to any of
        the Collateral,

       

      
        
          
          

        

        
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      (g)  change
        the definition of “Required Lenders” or “Pro Rata Share”,

       

      (h)  contractually
        subordinate any of Agent’s Liens,

       

      (i)  other
        than in connection with a merger, liquidation, dissolution or sale of such
        Person expressly permitted by the terms hereof or the other Loan Documents,
        release Borrower or any Guarantor from any obligation for the payment of
        money,

       

      (j)  amend
        any
        of the provisions of Section 2.4(b)(i) or (ii),

       

      (k)  change
        the definition of Borrowing Base, Maximum Revolver Amount, Term Loan Amount,
        or
        change Section 2.1(b), or

       

      (l)  amend
        any
        of the provisions of Section 15.

       

      and,
        provided further, however, that no amendment, waiver or consent
        shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender,
        as applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
        Lender, as applicable, under this Agreement or any other Loan
        Document.  The foregoing notwithstanding, any amendment, modification,
        waiver, consent, termination, or release of, or with respect to, any provision
        of this Agreement or any other Loan Document that relates only to the
        relationship of the Lender Group among themselves, and that does not affect
        the
        rights or obligations of Borrower, shall not require consent by or the agreement
        of Borrower.

       

      14.2  Replacement
        of Lenders.

       

      (a)           If
        (i) any action to be taken by the Lender Group or Agent hereunder requires
        the
        consent, authorization, or agreement of all Lenders, and a Lender (“Holdout
        Lender”) fails to give its consent, authorization, or agreement, or (ii) any
        Lender (an “Increased Cost Lender”; Increased Cost Lenders and Holdout
        Lenders are each referred to herein as “Replaceable Lenders”) shall give
        notice to Borrowers that such Lender is entitled to receive payments under
        Section 2.13(d)(i) or  Section 2.14,  then
        Agent or Borrower, upon at least 5 Business Days prior irrevocable notice
        to the
        Replaceable Lender, may permanently replace the Replaceable Lender with one
        or
        more substitute Lenders (each, a “Replacement Lender”; provided that
        neither Borrower or Guarantor nor any Affiliate of Borrower or Guarantor
        or of
        Permitted Holders shall be permitted to become a Replacement Lender), and
        the
        Replaceable Lender shall have no right to refuse to be replaced
        hereunder.  Such notice to replace the Replaceable Lender shall
        specify an effective date for such replacement, which date shall not be later
        than 15 Business Days after the date such notice is given.

       

      (b)           Prior
        to the effective date of such replacement, the Replaceable Lender and each
        Replacement Lender shall execute and deliver an Assignment and Acceptance,
        subject only to the Replaceable Lender being repaid its share of the outstanding
        Obligations (including an assumption of its Pro Rata Share of the Risk
        Participation Liability) without any premium or penalty of any kind
        whatsoever.  If the Replaceable Lender shall refuse or fail to execute
        and deliver any such Assignment and Acceptance prior to the effective date
        of
        such replacement, the Replaceable Lender shall be deemed to have executed
        and
        delivered such Assignment and Acceptance.  The replacement of any
        Replaceable Lender shall be made in accordance with the terms of Section
        13.1.  Until such time as the Replacement Lenders shall have
        acquired all of the Obligations, the Commitments, and the other rights and
        obligations of the Replaceable Lender hereunder and under the other Loan
        Documents, the Replaceable Lender shall remain obligated to make the Replaceable
        Lender’s Pro Rata Share of Advances and to purchase a participation in each
        Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
        Participation Liability of such Letter of Credit.

       

      14.3  No
        Waivers; Cumulative Remedies.  No
        failure by Agent or any Lender to exercise any right, remedy, or option under
        this Agreement or any other Loan Document, or delay by Agent or any Lender
        in
        exercising the same, will operate as a waiver thereof.  No waiver by
        Agent or any Lender will be effective unless it is in writing, and then only
        to
        the extent specifically stated.  No waiver by Agent or any Lender on
        any occasion shall affect or diminish Agent’s and each Lender’s rights
        thereafter to require strict performance by Borrower of any provision of
        this
        Agreement.  Agent’s and each Lender’s rights under this Agreement and
        the other Loan Documents will be cumulative and not exclusive of any other
        right
        or remedy that Agent or any Lender may have. 

       

      
        
          
          

        

        
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      15.  AGENT;
        THE LENDER GROUP.

       

      15.1  Appointment
        and Authorization of Agent.  Each
        Lender hereby designates and appoints WFF as its representative under this
        Agreement and the other Loan Documents and each Lender hereby irrevocably
        authorizes Agent to execute and deliver each of the other Loan Documents
        on its
        behalf and to take such other action on its behalf under the provisions of
        this
        Agreement and each other Loan Document and to exercise such powers and perform
        such duties as are expressly delegated to Agent by the terms of this Agreement
        or any other Loan Document, together with such powers as are reasonably
        incidental thereto.  Agent agrees to act as such on the express
        conditions contained in this Section 15. The provisions of this
Section 15 are solely for the benefit of Agent and the Lenders, and
        Borrower and its Subsidiaries shall have no rights as a third party beneficiary
        of any of the provisions contained herein, except with respect to Borrower’s
        consultation rights set forth in Section 15.9 and Borrower’s right to
        receive release documentation set forth in Section
        15.11(a).  Any provision to the contrary contained elsewhere in
        this Agreement or in any other Loan Document notwithstanding, Agent shall
        not
        have any duties or responsibilities, except those expressly set forth herein,
        nor shall Agent have or be deemed to have any fiduciary relationship with
        any
        Lender, and no implied covenants, functions, responsibilities, duties,
        obligations or liabilities shall be read into this Agreement or any other
        Loan
        Document or otherwise exist against Agent; it being expressly understood
        and
        agreed that the use of the word “Agent” is for convenience only, that WFF is
        merely the representative of the Lenders, and only has the contractual duties
        set forth herein.  Except as expressly otherwise provided in this
        Agreement, Agent shall have and may use its sole discretion with respect
        to
        exercising or refraining from exercising any discretionary rights or taking
        or
        refraining from taking any actions that Agent expressly is entitled to take
        or
        assert under or pursuant to this Agreement and the other Loan
        Documents.  Without limiting the generality of the foregoing, or of
        any other provision of the Loan Documents that provides rights or powers
        to
        Agent, Lenders agree that Agent shall have the right to exercise the following
        powers as long as this Agreement remains in effect:  (a) maintain, in
        accordance with its customary business practices, ledgers and records reflecting
        the status of the Obligations, the Collateral, the Collections of Borrower
        and
        its Subsidiaries, and related matters, (b) execute or file any and all financing
        or similar statements or notices, amendments, renewals, supplements, documents,
        instruments, proofs of claim, notices and other written agreements with respect
        to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders
        as
        provided in the Loan Documents, (d) exclusively receive, apply, and distribute
        the Collections of Borrower and its Subsidiaries as provided in the Loan
        Documents, (e) open and maintain such bank accounts and cash management
        arrangements as Agent deems necessary and appropriate in accordance with
        the
        Loan Documents for the foregoing purposes with respect to the Collateral
        and the
        Collections of Borrower and its Subsidiaries, (f) perform, exercise, and
        enforce any and all other rights and remedies of the Lender Group with respect
        to Borrower or its Subsidiaries, the Obligations, the Collateral, the
        Collections of Borrower and its Subsidiaries, or otherwise related to any
        of
        same as provided in the Loan Documents, and (g) incur and pay such Lender
        Group
        Expenses as Agent may deem necessary or appropriate for the performance and
        fulfillment of its functions and powers pursuant to the Loan
        Documents.

       

      15.2  Delegation
        of Duties.  Agent
        may execute any of its duties under this Agreement or any other Loan Document
        by
        or through agents, employees or attorneys in fact and shall be entitled to
        advice of counsel concerning all matters pertaining to such
        duties.  Agent shall not be responsible for the negligence or
        misconduct of any agent or attorney in fact that it selects as long as such
        selection was made without gross negligence or willful
        misconduct. 

       

      15.3  Liability
        of Agent.  None
        of Agent-Related Persons shall (a) be liable for any action taken or omitted
        to
        be taken by any of them under or in connection with this Agreement or any
        other
        Loan Document or the transactions contemplated hereby (except for its own
        gross
        negligence or willful misconduct), or (b) be responsible in any manner to
        any of
        the Lenders for any recital, statement, representation or warranty made by
        Borrower or any of its Subsidiaries or Affiliates, or any officer or director
        thereof, contained in this Agreement or in any other Loan Document, or in
        any
        certificate, report, statement or other document referred to or provided
        for in,
        or received by Agent under or in connection with, this Agreement or any other
        Loan Document, or the validity, effectiveness, genuineness, enforceability
        or
        sufficiency of this Agreement or any other Loan Document, or for any failure
        of
        Borrower or its Subsidiaries or any other party to any Loan Document to perform
        its obligations hereunder or thereunder.  No Agent-Related Person
        shall be under any obligation to any Lender 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 books and
        records or properties of Borrower or its Subsidiaries.

       

      15.4  Reliance
        by Agent.  Agent
        shall be entitled to rely, and shall be fully protected in relying, upon
        any
        writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
        telefacsimile or other electronic method of transmission, telex or telephone
        message, statement 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 Borrower or counsel to any Lender), independent accountants and other
        experts
        selected by Agent.  Agent shall be fully justified in failing or
        refusing to take any action under this Agreement or any other Loan Document
        unless Agent shall first receive such advice or concurrence of the Lenders
        as it
        deems appropriate and until such instructions are received, Agent shall act,
        or
        refrain from acting, as it deems advisable.  If Agent so requests, it
        shall first be indemnified to its reasonable satisfaction by the Lenders
        against
        any and all liability and expense that may be incurred by it by reason of
        taking
        or continuing to take any such action.  Agent shall in all cases be
        fully protected in acting, or in refraining from acting, under this Agreement
        or
        any other Loan Document in accordance with a request or consent of the requisite
        Lenders and such request and any action taken or failure to act pursuant
        thereto
        shall be binding upon all of the Lenders.

       

      15.5  Notice
        of Default or Event of Default.  Agent
        shall not be deemed to have knowledge or notice of the occurrence of any
        Default
        or Event of Default, except with respect to defaults in the payment of
        principal, interest, fees, and expenses required to be paid to Agent for
        the
        account of the Lenders and, except with respect to Events of Default of which
        Agent has actual knowledge, unless Agent shall have received written notice
        from
        a Lender or Borrower referring to this Agreement, describing such Default
        or
        Event of Default, and stating that such notice is a “notice of
        default.”  Agent promptly will notify the Lenders of its receipt of
        any such notice or of any Event of Default of which Agent has actual
        knowledge.  If any Lender obtains actual knowledge of any Event of
        Default, such Lender promptly shall notify the other Lenders and Agent of
        such
        Event of Default.  Each Lender shall be solely responsible for giving
        any notices to its Participants, if any.  Subject to Section
        15.4, Agent shall take such action with respect to such Default or Event
        of
        Default as may be requested by the Required Lenders in accordance with
Section 8; provided, however, that unless and until Agent
        has received any such request, 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.

       

      
        
          
          

        

        
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      15.6  Credit
        Decision.  Each
        Lender acknowledges that none of Agent-Related Persons has made any
        representation or warranty to it, and that no act by Agent hereinafter taken,
        including any review of the affairs of Borrower and its Subsidiaries or
        Affiliates, shall be deemed to constitute any representation or warranty
        by any
        Agent-Related Person to any Lender.  Each Lender represents to Agent
        that it has, independently and without reliance upon any Agent-Related Person
        and based on such documents and information as it has deemed appropriate,
        made
        its own appraisal of and investigation into the business, prospects, operations,
        property, financial and other condition and creditworthiness of Borrower
        or any
        other Person party to a Loan Document, and all applicable bank regulatory
        laws
        relating to the transactions contemplated hereby, and made its own decision
        to
        enter into this Agreement and to extend credit to Borrower.  Each
        Lender also represents that it will, independently and without reliance upon
        any
        Agent-Related Person 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 investigations as it deems necessary
        to inform itself as to the business, prospects, operations, property, financial
        and other condition and creditworthiness of Borrower or any other Person
        party
        to a Loan Document.  Except for notices, reports, and other documents
        expressly herein required to be furnished to the Lenders by Agent, Agent
        shall
        not have any duty or responsibility to provide any Lender with any credit
        or
        other information concerning the business, prospects, operations, property,
        financial and other condition or creditworthiness of Borrower or any other
        Person party to a Loan Document that may come into the possession of any
        of
        Agent-Related Persons.

       

      15.7  Costs
        and Expenses; Indemnification.  Agent
        may incur and pay Lender Group Expenses to the extent Agent reasonably deems
        necessary or appropriate for the performance and fulfillment of its functions,
        powers, and obligations pursuant to the Loan Documents, including court costs,
        attorneys fees and expenses, fees and expenses of financial accountants,
        advisors, consultants, and appraisers, costs of collection by outside collection
        agencies, auctioneer fees and expenses, and costs of security guards or
        insurance premiums paid to maintain the Collateral, whether or not Borrower
        is
        obligated to reimburse Agent or Lenders for such expenses pursuant to this
        Agreement or otherwise.  Agent is authorized and directed to deduct
        and retain sufficient amounts from the Collections of Borrower and its
        Subsidiaries received by Agent to reimburse Agent for such out-of-pocket
        costs
        and expenses prior to the distribution of any amounts to Lenders.  In
        the event Agent is not reimbursed for such costs and expenses by Borrower
        or its
        Subsidiaries, each Lender hereby agrees that it is and shall be obligated
        to pay
        to Agent such Lender’s Pro Rata Share thereof.  Whether or not the
        transactions contemplated hereby are consummated, the Lenders shall indemnify
        upon demand Agent-Related Persons (to the extent not reimbursed by or on
        behalf
        of Borrower and without limiting the obligation of Borrower to do so), according
        to their Pro Rata Shares, from and against any and all Indemnified Liabilities;
        provided, however, that no Lender shall be liable for the payment
        to any Agent-Related Person of any portion of such Indemnified Liabilities
        resulting solely from such Person’s gross negligence or willful misconduct nor
        shall any Lender be liable for the obligations of any Defaulting Lender in
        failing to make an Advance or other extension of credit
        hereunder.  Without limitation of the foregoing, each Lender shall
        reimburse Agent upon demand for such Lender’s Pro Rata Share of any costs or out
        of pocket expenses (including attorneys, accountants, advisors, and consultants
        fees and expenses) incurred by Agent in connection with the preparation,
        execution, delivery, administration, modification, amendment, or enforcement
        (whether through negotiations, legal proceedings or otherwise) of, or legal
        advice in respect of rights or responsibilities under, this Agreement, any
        other
        Loan Document, or any document contemplated by or referred to herein, to
        the
        extent that Agent is not reimbursed for such expenses by or on behalf of
        Borrower.  The undertaking in this Section shall survive the payment
        of all Obligations hereunder and the resignation or replacement of
        Agent.

       

      15.8  Agent
        in Individual Capacity.  WFF
        and its Affiliates may make loans to, issue letters of credit for the account
        of, accept deposits from, acquire equity interests in, and generally engage
        in
        any kind of banking, trust, financial advisory, underwriting, or other business
        with Borrower and its Subsidiaries and Affiliates and any other Person party
        to
        any Loan Documents as though WFF were not Agent hereunder, and, in each case,
        without notice to or consent of the other members of the Lender
        Group.  The other members of the Lender Group acknowledge that,
        pursuant to such activities, WFF or its Affiliates may receive information
        regarding Borrower or its Affiliates or any other Person party to any Loan
        Documents that is subject to confidentiality obligations in favor of Borrower
        or
        such other Person and that prohibit the disclosure of such information to
        the
        Lenders, and the Lenders acknowledge that, in such circumstances (and in
        the
        absence of a waiver of such confidentiality obligations, which waiver Agent
        will
        use its reasonable best efforts to obtain), Agent shall not be under any
        obligation to provide such information to them.  The terms “Lender”
and “Lenders” include WFF in its individual capacity. 

       

      15.9  Successor
        Agent.  Agent
        may resign as Agent upon forty-five (45) days notice to the Lenders (unless
        such
        notice is waived by the Required Lenders).  If Agent resigns under
        this Agreement, the Required Lenders, in consultation with Borrower, shall
        have
        the right to appoint a successor Agent for the Lenders;  provided that
        after the occurrence and during the continuation of a Default or an Event
        of
        Default, the Required Lenders shall have no obligation to consult Borrower
        prior
        to appointing a successor Agent. If no successor Agent is appointed prior
        to the effective date of the resignation or removal of Agent, Agent may appoint,
        after consulting with the Lenders, a successor Agent.  At any time,
        Agent may be removed upon prior notice from the Required Lenders to Agent
        and
        the other Lenders. If Agent has been removed by the Required Lenders, Required
        Lenders may agree in writing to replace Agent with a successor Agent from
        among
        the Lenders.  In any such event, upon the acceptance of its
        appointment as successor Agent hereunder, such successor Agent shall succeed
        to
        all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent and the retiring Agent’s appointment, powers,
        and duties as Agent shall be terminated.  The fees payable by Borrower
        to a successor Agent shall be the same as those payable to its predecessor
        unless otherwise agreed between Borrower and such successor.  After
        any retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 15 shall inure to its benefit as to any actions taken or omitted
        to be taken by it while it was Agent under this Agreement.  If no
        successor Agent has accepted appointment as Agent by the date which is
        forty-five (45) days following a retiring Agent’s notice of resignation, the
        retiring Agent’s resignation shall nevertheless thereupon become effective and
        the Lenders shall perform all of the duties of Agent hereunder until such
        time,
        if any, as the Lenders appoint a successor Agent as provided for
        above.

       

      15.10  Lender
        in Individual Capacity. 
        Any Lender and its respective Affiliates may make loans to, issue letters
        of
        credit for the account of, accept deposits from, acquire equity interests
        in and
        generally engage in any kind of banking, trust, financial advisory,
        underwriting, or other business with Borrower and its Subsidiaries and
        Affiliates and any other Person party to any Loan Documents as though such
        Lender were not a Lender hereunder without notice to or consent of the other
        members of the Lender Group.  The other members of the Lender Group
        acknowledge that, pursuant to such activities, such Lender and its respective
        Affiliates may receive information regarding Borrower or its Affiliates or
        any
        other Person party to any Loan Documents that is subject to confidentiality
        obligations in favor of Borrower or such other Person and that prohibit the
        disclosure of such information to the Lenders, and the Lenders acknowledge
        that,
        in such circumstances (and in the absence of a waiver of such confidentiality
        obligations, which waiver such Lender will use its reasonable best efforts
        to
        obtain), such Lender shall not be under any obligation to provide such
        information to them.

       

      
        
          
          

        

        
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      15.11  Collateral
        Matters.

       

          (a)  The
        Lenders hereby irrevocably authorize Agent, at its option and in its sole
        discretion, to release any Lien on any Collateral or other collateral securing
        the Obligations (i) upon the termination of the Commitments and payment and
        satisfaction in full by Borrower of all Obligations, (ii) constituting property
        being sold or disposed of if a release is required or desirable in connection
        therewith and if Borrower certifies to Agent that the sale or disposition
        is
        permitted under Section 6.4 of this Agreement or the other Loan Documents
        (and Agent may rely conclusively on any such certificate, without further
        inquiry), (iii) constituting property in which Borrower or its Subsidiaries
        owned no interest at the time Agent’s Lien was granted nor at any time
        thereafter, or (iv) constituting property leased to Borrower or its
        Subsidiaries under a lease that has expired or is terminated in a transaction
        permitted under this Agreement.  Except as provided above, Agent will
        not execute and deliver a release of any Lien on any Collateral or other
        collateral securing the Obligations without the prior written authorization
        of
        (y) if the release is of all or substantially all of the Collateral, all
        of the
        Lenders, or (z) otherwise, the Required Lenders.  Upon request by
        Agent or Borrower at any time, the Lenders will confirm in writing Agent’s
        authority to release any such Liens on particular types or items of Collateral
        or other collateral securing the Obligations pursuant to this Section
        15.11.  Upon receipt (i)  by Agent of any confirmation
        from all of the Lenders or the Required Lenders, as applicable, or (ii) the
        occurrence of an event described above for which collateral release does
        not
        require the approval of any Lender and upon at least ten (10) Business Days’ (or
        such shorter period as may be approved by Agent) prior written request by
        Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
        execute such documents as may be necessary to evidence the release of the
        Liens
        granted to Agent upon such Collateral or other collateral securing the
        Obligations; provided, however, that (1) Agent shall not be
        required to execute any document necessary to evidence such release on terms
        that, in Agent’s opinion, would expose Agent to liability or create any
        obligation or entail any consequence other than the release of such Lien
        without
        recourse, representation, or warranty, and (2) such release shall not in
        any
        manner discharge, affect, or impair the Obligations or any Liens (other than
        those expressly being released) upon (or obligations of Borrower in respect
        of)
        all interests retained by Borrower, including, the proceeds of any sale,
        all of
        which shall continue to constitute part of the Collateral.

       

      (b)  Agent
        shall have no obligation whatsoever to any of the Lenders to assure that
        the
        Collateral exists or is owned by Borrower or its Subsidiaries or is cared
        for,
        protected, or insured or has been encumbered, or that Agent’s Liens have been
        properly or sufficiently or lawfully created, perfected, protected, or enforced
        or are entitled to any particular priority, or to exercise at all or in any
        particular manner or under any duty of care, disclosure or fidelity, or to
        continue exercising, any of the rights, authorities and powers granted or
        available to Agent pursuant to any of the Loan Documents, it being understood
        and agreed that in respect of the Collateral, or any act, omission, or event
        related thereto, subject to the terms and conditions contained herein, Agent
        may
        act in any manner it may deem appropriate, in its sole discretion given Agent’s
        own interest in the Collateral in its capacity as one of the Lenders and
        that
        Agent shall have no other duty or liability whatsoever to any Lender as to
        any
        of the foregoing, except as otherwise provided herein.

       

      15.12  Restrictions
        on Actions by Lenders; Sharing of Payments.

       

      (a)  Each
        of
        the Lenders agrees that it shall not, without the express written consent
        of
        Agent, and that it shall, to the extent it is lawfully entitled to do so,
        upon
        the written request of Agent, set off against the Obligations, any amounts
        owing
        by such Lender to Borrower or its Subsidiaries or any deposit accounts of
        Borrower or its Subsidiaries now or hereafter maintained with such
        Lender.  Each of the Lenders further agrees that it shall not, unless
        specifically requested to do so in writing by Agent, take or cause to be
        taken
        any action, including, the commencement of any legal or equitable proceedings
        to
        enforce any Loan Document against Borrower or any Guarantor or to foreclose
        any
        Lien on, or otherwise enforce any security interest in, any of the
        Collateral.

       

      (b)  If,
        at
        any time or times any Lender shall receive (i) by payment, foreclosure, setoff,
        or otherwise, any proceeds of Collateral or any payments with respect to
        the
        Obligations, except for any such proceeds or payments received by such Lender
        from Agent pursuant to the terms of this Agreement, or (ii) payments from
        Agent in excess of such Lender’s Pro Rata Share of all such distributions by
        Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
        and
        with such endorsements as may be required to negotiate the same to Agent,
        or in
        immediately available funds, as applicable, for the account of all of the
        Lenders and for application to the Obligations in accordance with the applicable
        provisions of this Agreement, or (B) purchase, without recourse or warranty,
        an
        undivided interest and participation in the Obligations owed to the other
        Lenders so that such excess payment received shall be applied ratably as
        among
        the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by
        the
        purchasing party is thereafter recovered from it, those purchases of
        participations shall be rescinded in whole or in part, as applicable, and
        the
        applicable portion of the purchase price paid therefor shall be returned
        to such
        purchasing party, but without interest except to the extent that such purchasing
        party is required to pay interest in connection with the recovery of the
        excess
        payment.

       

      15.13  Agency
        for Perfection.  Agent
        hereby appoints each other Lender as its agent (and each Lender hereby accepts
        such appointment) for the purpose of perfecting Agent’s Liens in assets which,
        in accordance with Article 8 or Article 9, as applicable, of the Code can
        be
        perfected only by possession or control.  Should any Lender obtain
        possession or control of any such Collateral, such Lender shall notify Agent
        thereof, and, promptly upon Agent’s request therefor shall deliver possession or
        control of such Collateral to Agent or in accordance with Agent’s
        instructions.

       

      15.14  Payments
        by Agent to the Lenders.  All
        payments to be made by Agent to the Lenders shall be made by bank wire transfer
        of immediately available funds pursuant to such wire transfer instructions
        as
        each party may designate for itself by written notice to
        Agent.  Concurrently with each such payment, Agent shall identify
        whether such payment (or any portion thereof) represents principal, premium,
        fees, or interest of the Obligations.

       

      15.15  Concerning
        the Collateral and Related Loan Documents.  Each
        member of the Lender Group authorizes and directs Agent to enter into this
        Agreement and the other Loan Documents.  Each member of the Lender
        Group agrees that any action taken by Agent in accordance with the terms
        of this
        Agreement or the other Loan Documents relating to the Collateral and the
        exercise by Agent of its powers set forth therein or herein, together with
        such
        other powers that are reasonably incidental thereto, shall be binding upon
        all
        of the Lenders.

       

      15.16  Field
        Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
        Other
        Reports and Information.  By
        becoming a party to this Agreement, each Lender:

       

      
        
          
          

        

        
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      (a)  is
        deemed
        to have requested that Agent furnish such Lender, promptly after it becomes
        available, a copy of each field audit or examination report respecting Borrower
        or its Subsidiaries (each a “Report” and collectively, “Reports”)
        prepared by or at the request of Agent, and Agent shall so furnish each Lender
        with such Reports,

       

      (b)  expressly
        agrees and acknowledges that Agent does not (i) make any representation or
        warranty as to the accuracy of any Report, and (ii) shall not be liable for
        any
        information contained in any Report,

       

      (c)  expressly
        agrees and acknowledges that the Reports are not comprehensive audits or
        examinations, that Agent or other party performing any audit or examination
        will
        inspect only specific information regarding Borrower and its Subsidiaries
        and
        will rely significantly upon Borrower’s and its Subsidiaries’ books and records,
        as well as on representations of Borrower’s personnel,

       

      (d)  agrees
        to
        keep all Reports and other material, non-public information regarding Borrower
        and its Subsidiaries and their operations, assets, and existing and contemplated
        business plans in a confidential manner in accordance with Section 17.9,
        and

       

      (e)  without
        limiting the generality of any other indemnification provision contained
        in this
        Agreement, agrees: (i) to hold Agent and any other Lender preparing a Report
        harmless from any action the indemnifying Lender may take or fail to take
        or any
        conclusion the indemnifying Lender may reach or draw from any Report in
        connection with any loans or other credit accommodations that the indemnifying
        Lender has made or may make to Borrower, or the indemnifying Lender’s
        participation in, or the indemnifying Lender’s purchase of, a loan or loans of
        Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent,
        and
        any such other Lender preparing a Report harmless from and against, the claims,
        actions, proceedings, damages, costs, expenses, and other amounts (including,
        attorneys fees and costs) incurred by Agent and any such other Lender preparing
        a Report as the direct or indirect result of any third parties who might
        obtain
        all or part of any Report through the indemnifying Lender.

       

      In
        addition to the foregoing: (x) any Lender may from time to time request of
        Agent
        in writing that Agent provide to such Lender a copy of any report or document
        provided by Borrower or its Subsidiaries to Agent that has not been
        contemporaneously provided by Borrower or such Subsidiary to such Lender,
        and,
        upon receipt of such request, Agent promptly shall provide a copy of same
        to
        such Lender, (y) to the extent that Agent is entitled, under any provision
        of
        the Loan Documents, to request additional reports or information from Borrower
        or its Subsidiaries, any Lender may, from time to time, reasonably request
        Agent
        to exercise such right as specified in such Lender’s notice to Agent, whereupon
        Agent promptly shall request of Borrower the additional reports or information
        reasonably specified by such Lender, and, upon receipt thereof from Borrower
        or
        such Subsidiary, Agent promptly shall provide a copy of same to such Lender,
        and
        (z) any time that Agent renders to Borrower a statement regarding the Loan
        Account, Agent shall send a copy of such statement to each Lender.

       

      15.17  Several
        Obligations; No Liability.  Notwithstanding
        that certain of the Loan Documents now or hereafter may have been or will
        be
        executed only by or in favor of Agent in its capacity as such, and not by
        or in
        favor of the Lenders, any and all obligations on the part of Agent (if any)
        to
        make any credit available hereunder shall constitute the several (and not
        joint)
        obligations of the respective Lenders on a ratable basis, according to their
        respective Commitments, to make an amount of such credit not to exceed, in
        principal amount, at any one time outstanding, the amount of their respective
        Commitments.  Nothing contained herein shall confer upon any Lender
        any interest in, or subject any Lender to any liability for, or in respect
        of,
        the business, assets, profits, losses, or liabilities of any other
        Lender.  Each Lender shall be solely responsible for notifying its
        Participants of any matters relating to the Loan Documents to the extent
        any
        such notice may be required, and no Lender shall have any obligation, duty,
        or
        liability to any Participant of any other Lender.  Except as provided
        in Section 15.7, no member of the Lender Group shall have any liability
        for the acts of any other member of the Lender Group.  No Lender shall
        be responsible to Borrower or any other Person for any failure by any other
        Lender to fulfill its obligations to make credit available hereunder, nor
        to
        advance for it or on its behalf in connection with its Commitment, nor to
        take
        any other action on its behalf hereunder or in connection with the financing
        contemplated herein.

       

      16.  WITHHOLDING
        TAXES.

       

      (a)  All
        payments made by any Loan Party hereunder or under any note or other Loan
        Document will be made without setoff, counterclaim, or other
        defense.  In addition, all such payments will be made free and clear
        of, and without deduction or withholding for, any present or future Indemnified
        Taxes and Other Taxes, and in the event any deduction or withholding of
        Indemnified Taxes and Other Taxes is required, each Loan Party shall comply
        with
        the penultimate sentence of this Section 16(a).  If any
        Indemnified Taxes and Other Taxes are so levied or imposed, each Loan Party
        agrees to pay the full amount of such Indemnified Taxes and Other Taxes and
        such
        additional amounts as may be necessary so that every payment of all amounts
        due
        under this Agreement, any note, or Loan Document, including any amount paid
        pursuant to this Section 16(a) after withholding or deduction for or on
        account of any Indemnified Taxes and Other Taxes, will not be less than the
        amount provided for herein; provided, however, that no such Loan Party shall
        be
        required to increase any such amounts if the increase in such amount payable
        results from Agent’s or such Lender’s own willful misconduct or gross negligence
        (as finally determined by a court of competent jurisdiction).  Each
        Loan Party will furnish to Agent as promptly as possible after the date the
        payment of any Indemnified Tax and Other Tax is due pursuant to applicable
        law
        certified copies of tax receipts evidencing such payment by such Loan
        Party.

       

      (b)  If
        a
        Lender claims an exemption from United States withholding tax, Lender agrees
        with and in favor of Agent and Borrower, to deliver to Agent:

       

      (i)  if
        such
        Lender claims an exemption from United States withholding tax pursuant to
        its
        portfolio interest exception, (A) a statement of the Lender, signed under
        penalty of perjury, that it is not a (I) a “bank” as described in Section
        881(c)(3)(A) of the IRC, (II) a 10% shareholder of Borrower (within the meaning
        of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation
        related to Borrower within the meaning of Section 864(d)(4) of the IRC, and
        (B)
        a properly completed and executed IRS Form W-8BEN, before receiving its first
        payment under this Agreement and at any other time reasonably requested by
        Agent
        or Borrower;

       

      (ii)  if
        such
        Lender claims an exemption from, or a reduction of, withholding tax under
        a
        United States tax treaty, properly completed and executed IRS Form W-8BEN
        before
        receiving its first payment under this Agreement and at any other time
        reasonably requested by Agent or Borrower;

      
        
          
          

        

        
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      (iii)  if
        such
        Lender claims that interest paid under this Agreement is exempt from United
        States withholding tax because it is effectively connected with a United
        States
        trade or business of such Lender, two properly completed and executed copies
        of
        IRS Form W-8ECI before receiving its first payment under this Agreement and
        at
        any other time reasonably requested by Agent or Borrower; or

       

      (iv)  such
        other form or forms, including IRS Form W-9, as may be required under the
        IRC or
        other laws of the United States as a condition to exemption from, or reduction
        of, United States withholding or backup withholding tax before receiving
        its
        first payment under this Agreement and at any other time reasonably requested
        by
        Agent or Borrower.

       

      Lender
        agrees promptly to notify Agent and Borrower of any change in circumstances
        which would modify or render invalid any claimed exemption or
        reduction.

       

      (c)  If
        a
        Lender claims an exemption from withholding tax in a jurisdiction other than
        the
        United States, Lender agrees with and in favor of Agent and Borrower, to
        deliver
        to Agent any such form or forms, as may be required under the laws of such
        jurisdiction as a condition to exemption from, or reduction of, foreign
        withholding or backup withholding tax before receiving its first payment
        under
        this Agreement and at any other time reasonably requested by Agent or
        Borrower.

       

      Lender
        agrees promptly to notify Agent and Borrower of any change in circumstances
        which would modify or render invalid any claimed exemption or
        reduction.

       

      (d)  If
        any
        Lender claims exemption from, or reduction of, withholding tax and such Lender
        sells, assigns, grants a participation in, or otherwise transfers all or
        part of
        the Obligations of Borrower to such Lender, such Lender agrees to notify
        Agent
        and Borrower of  the percentage amount in which it is no longer the
        beneficial owner of Obligations of Borrower to such Lender.  To the
        extent of such percentage amount, Agent and Borrower will treat such Lender’s
        documentation provided pursuant to Sections 16(b) or 16(c) as no longer
        valid.  With respect to such percentage amount, Lender may provide new
        documentation, pursuant to Sections 16(b) or 16(c), if
        applicable.

       

      (e)  If
        any
        Lender is entitled to a reduction in the applicable withholding tax, Agent
        may
        withhold from any interest payment to such Lender an amount equivalent to
        the
        applicable withholding tax after taking into account such
        reduction.  If the forms or other documentation required by
subsection (b) or (c) of this Section 16 are not delivered to
        Agent, then Agent may withhold from any interest payment to such Lender not
        providing such forms or other documentation an amount equivalent to the
        applicable withholding tax.

       

      (f)  If
        the
        IRS or any other Governmental Authority of the United States or other
        jurisdiction asserts a claim that Agent did not properly withhold tax from
        amounts paid to or for the account of any Lender due to a failure on the
        part of
        the Lender (because the appropriate form was not delivered, was not properly
        executed, or because such Lender failed to notify Agent of a change in
        circumstances which rendered the exemption from, or reduction of, withholding
        tax ineffective, or for any other reason) such Lender shall indemnify and
        hold
        Agent harmless for all amounts paid, directly or indirectly, by Agent, as
        tax or
        otherwise, including penalties and interest, and including any taxes imposed
        by
        any jurisdiction on the amounts payable to Agent under this Section 16,
        together with all costs and expenses (including attorneys fees and
        expenses).  The obligation of the Lenders under this subsection shall
        survive the payment of all Obligations and the resignation or replacement
        of
        Agent.

       

      17.  GENERAL
        PROVISIONS.

       

      17.1  Effectiveness.  This
        Agreement shall be binding and deemed effective when executed by Borrower,
        Agent, and each Lender whose signature is provided for on the signature pages
        hereof.

       

      17.2  Section
        Headings.  Headings
        and numbers have been set forth herein for convenience only.  Unless
        the contrary is compelled by the context, everything contained in each Section
        applies equally to this entire Agreement.

       

      17.3  Interpretation.  Neither
        this Agreement nor any uncertainty or ambiguity herein shall be construed
        against the Lender Group or Borrower, whether under any rule of construction
        or
        otherwise.  On the contrary, this Agreement has been reviewed by all
        parties and shall be construed and interpreted according to the ordinary
        meaning
        of the words used so as to accomplish fairly the purposes and intentions
        of all
        parties hereto.

       

      17.4  Severability
        of Provisions.  Each
        provision of this Agreement shall be severable from every other provision
        of
        this Agreement for the purpose of determining the legal enforceability of
        any
        specific provision.

       

      17.5  Bank
        Product Providers.  Each
        Bank Product Provider shall be deemed a party hereto for purposes of any
        reference in a Loan Document to the parties for whom Agent is acting; it
        being
        understood and agreed that the rights and benefits of such Bank Product Provider
        under the Loan Documents consist exclusively of such Bank Product Provider’s
        right to share in payments and collections out of the Collateral as more
        fully
        set forth herein. In connection with any such distribution of payments and
        collections, Agent shall be entitled to assume no amounts are due to any
        Bank
        Product Provider unless such Bank Product Provider has notified Agent in
        writing
        of the amount of any such liability owed to it prior to such
        distribution.

       

      17.6  Lender-Creditor
        Relationship.  The
        relationship between the Lenders and Agent, on the one hand, and Borrower,
        on
        the other hand, is solely that of creditor and debtor.  No member of
        the Lender Group has (or shall be deemed to have) any fiduciary relationship
        or
        duty to Borrower arising out of or in connection with, and there is no agency
        or
        joint venture relationship between the members of the Lender Group, on the
        one
        hand, and Borrower, on the other hand, by virtue of any Loan Document or
        any
        transaction contemplated therein.

       

      
        
          
          

        

        
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      17.7  Counterparts;
        Electronic Execution.  This
        Agreement may be executed in any number of counterparts and by different
        parties
        on separate counterparts, each of which, when executed and delivered, shall
        be
        deemed to be an original, and all of which, when taken together, shall
        constitute but one and the same Agreement.  Delivery of an executed
        counterpart of this Agreement by telefacsimile or other electronic method
        of
        transmission shall be equally as effective as delivery of an original executed
        counterpart of this Agreement.  Any party delivering an executed
        counterpart of this Agreement by telefacsimile or other electronic method
        of
        transmission also shall deliver an original executed counterpart of this
        Agreement but the failure to deliver an original executed counterpart shall
        not
        affect the validity, enforceability, and binding effect of this
        Agreement.  The foregoing shall apply to each other Loan Document
mutatis mutandis.

       

      17.8  Revival
        and Reinstatement of Obligations.  If
        the incurrence or payment of the Obligations by Borrower or Guarantor or
        the
        transfer to the Lender Group of any property should for any reason subsequently
        be declared to be void or voidable under any state or federal law relating
        to
        creditors’ rights, including provisions of the Bankruptcy Code relating to
        fraudulent conveyances, preferences, or other voidable or recoverable payments
        of money or transfers of property (each, a “Voidable Transfer”), and if
        the Lender Group is required to repay or restore, in whole or in part, any
        such
        Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
        then, as to any such Voidable Transfer, or the amount thereof that the Lender
        Group is required or elects to repay or restore, and as to all reasonable
        costs,
        expenses, and attorneys fees of the Lender Group related thereto, the liability
        of Borrower or Guarantor automatically shall be revived, reinstated, and
        restored and shall exist as though such Voidable Transfer had never been
        made.

       

      17.9  Confidentiality.

       

      (a)  Agent
        and
        Lenders each individually (and not jointly or jointly and severally) agree
        that
        material, non-public information regarding Borrower and its Subsidiaries,
        their
        operations, assets, and existing and contemplated business plans shall be
        treated by Agent and the Lenders in a confidential manner, and shall not
        be
        disclosed by Agent and the Lenders to Persons who are not parties to this
        Agreement, except:  (i) to attorneys for and other advisors,
        accountants, auditors, and consultants to any member of the Lender Group
        (it
        being understood that the Persons to whom such disclosure is made will be
        informed of the confidential nature of such information and instructed to
        keep
        such information confidential), (ii) to Subsidiaries and Affiliates of any
        member of the Lender Group (including the Bank Product Providers), provided
        that
        any such Subsidiary or Affiliate shall have agreed to receive such information
        hereunder subject to the terms of this Section 17.9, (iii) as may be
        required by statute, decision, or judicial or administrative order, rule,
        or
        regulation, (iv) as may be agreed to in advance by Borrower or as requested
        or
        required by any Governmental Authority pursuant to any subpoena or other
        legal
        process, (v) as to any such information that is or becomes generally available
        to the public (other than as a result of prohibited disclosure by Agent or
        the
        Lenders), (vi) in connection with any assignment, prospective assignment,
        sale,
        prospective sale, participation, prospective participation or pledge or
        prospective or pledge of any Lender’s interest under this Agreement, provided
        that any such assignee, prospective assignment, sale, prospective sale,
        participation, prospective participation or pledge or prospective or pledgee
        shall have agreed in writing to receive such information hereunder subject
        to
        the terms of this Section, and (vii) in connection with any litigation or
        other
        adversary proceeding involving parties hereto which such litigation or adversary
        proceeding involves claims related to the rights or duties of such parties
        under
        this Agreement or the other Loan Documents.  The provisions of this
Section 17.9(a) shall survive for two (2) years after the payment in full
        of the Obligations.

       

      (b)  Anything
        in this Agreement to the contrary notwithstanding, Agent may provide information
        concerning the terms and conditions of this Agreement and the other Loan
        Documents to loan syndication and pricing reporting services.

       

      17.10  Lender
        Group Expenses. 
        Lender Group Expenses shall become due and payable ten (10) days after receipt
        of an invoice from the Agent setting forth in reasonable detail the Lender
        Group
        Expenses for which payment is being demanded. Borrower agrees to pay any
        and all
        Lender Group Expenses as set forth above and agrees that its
        obligations contained in this Section 17.10 shall survive payment or
        satisfaction in full of all other Obligations.

       

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

       

      17.12  Integration.  This
        Agreement, together with the other Loan Documents, reflects the entire
        understanding of the parties with respect to the transactions contemplated
        hereby and shall not be contradicted or qualified by any other agreement,
        oral
        or written, before the date hereof.\ 
         

        [Signature
          pages to follow.]

         

      

       

      
        
          
          

        

        
          -41-

          
            

          

        

        
          
          

        

      

      

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

       

      
        	 	
                STORM
                  CAT ENERGY (USA) CORPORATION,

                as
                  Borrower

              
	 	 
	 	 
	 	
                By:

              	
                /s/
                  Joseph M. Brooker

              
	 	
                Name:

              	Joseph
                M. Brooker
	 	
                Title:

              	Chief
                Executive Officer
	 	 
	 	 
	 	
                WELLS
                  FARGO FOOTHILL, LLC,

                as
                  Agent and as a Lender

              
	 	 
	 	
                By:

              	
                /s/
                  Eugene P. McDonough

              
	 	
                Name:

              	Eugene P.
                McDonough
	 	
                Title:

              	Vice-President
	 	 

      

      

      
        	 	 
	 	
                REGIMENT
                  CAPITAL SPECIAL SITUATIONS FUND III, L.P., as a Lender

              
	 	
                 

                By:  Regiment
                  Capital GP, LLC

                        its
                  General Partner

                 

              
	 	
                By:

              	
                /s/
                  Richard T. Miller

              
	 	
                Name:

              	Richard
                T. Miller
	 	
                Title:

              	Authorized
                Signatory
	 	 
	 	
                Address
                  for Notice:

              
	 	
                222
                  Berkeley Street, 12th
                  Floor

              
	 	
                Boston,
                  Massachusetts 02116

              
	 	
                Attn: 
                  Kyle O’Neil

              
	 	
                Fax
                  No.: (617) 488-1688

              

      

      

      
        
          
          

        

        
          -42-

          
            

          

        

        
          
          

        

      

       

      Schedule
        1.1

       

      As
        used
        in the Agreement, the following terms shall have the following
        definitions:

       

      “Account”
        means an account (as that term is defined in the Code).

       

      “Account
        Debtor” means any Person who is obligated on an Account, chattel paper, or a
        general intangible.

       

      “ACH
        Transactions” means any cash management or related services (including the
        Automated Clearing House processing of electronic fund transfers through
        the
        direct Federal Reserve Fedline system) provided by a Bank Product Provider
        for
        the account of Parent or its Subsidiaries.

       

      “Act”
        has the meaning specified therefor in Section 17.11.

       

      “Additional
        Documents” has the meaning specified therefor in Section
        5.16.

       

      “Advances”
        has the meaning specified therefor in Section 2.1(a).

       

      “Affiliate”
        shall mean, with respect to any Person, (a) each Person that, directly or
        indirectly, owns or controls, whether beneficially, or as a trustee, guardian
        or
        other fiduciary or a joint venturer or partner, ten percent (10%) or more
        of the
        Stock having ordinary voting power in the election of directors of such Persons,
        (b) each Person that controls, is controlled by or is under common control
        with
        such Person, (c) each of such Person’s officers, directors, joint venturers and
        partners (in the case of joint venturers and partners, to the extent covered
        by
        clause (a)), and (d) in the case of any Loan Party, the immediate family
        members, spouses and lineal descendants of individuals who are Affiliates
        of any
        Loan Party.  For the purposes of this definition, “control” of
        a Person shall mean the possession, directly or indirectly, of the power
        to
        direct or cause the direction of its management or policies, whether through
        the
        ownership of voting securities, by contract or otherwise; provided,
however, that the term “Affiliate” shall specifically exclude
        Agent and each Lender.

       

      “Agent”
        has the meaning specified therefor in the preamble to the
        Agreement.

       

      “Agent-Related
        Persons” means Agent, together with its Affiliates, officers, directors,
        employees, attorneys, and agents.

       

      “Agent’s
        Account” means the Deposit Account of Agent identified on Schedule
        A-1.

       

      “Agent’s
        Liens” mean the Liens granted by Parent or its Subsidiaries to Agent under
        the Loan Documents.

       

      “Agreement”
        means the Credit Agreement to which this Schedule 1.1 is
        attached.

       

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

       

      “Approved
        Fund” means any Fund that is administered or managed by (a) a Lender, (b) an
        Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
        administers or manages a Lender.

       

      “Asset
        Coverage Ratio” means, as of any date of determination (a) Parent’s
        Total Reserve Value as of such date, divided by (b) the amount of
        Parent’s Total Debt as of such date.

       

      “Assignee”
        has the meaning specified therefor in Section 13.1(a).

       

      “Assignment
        and Acceptance” means an Assignment and Acceptance Agreement substantially
        in the form of Exhibit A-1.

       

      “Authorized
        Person” means any one of the individuals identified on Schedule
        A-2.

       

      “Availability”
        means, as of any date of determination, the amount that Borrower is entitled
        to
        borrow as Advances under Section 2.1 of the Agreement (after giving
        effect to all then outstanding Obligations (other than Bank Product Obligations)
        and all sublimits and reserves then applicable hereunder).

       

      “Bank
        Product” means any financial accommodation extended to Borrower or its
        Subsidiaries by a Bank Product Provider (other than pursuant to the Agreement)
        including:  (a) credit cards, (b) credit card processing services, (c)
        debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management,
        including controlled disbursement, accounts or services, or (g) transactions
        under Swap Agreements.

       

      “Bank
        Product Agreements” means those agreements entered into from time to time by
        Parent or its Subsidiaries with a Bank Product Provider in connection with
        the
        obtaining of any of the Bank Products.

       

      “Bank
        Product Collateralization” means providing cash collateral (pursuant to
        documentation reasonably satisfactory to Agent) to be held by Agent for the
        benefit of the Bank Product Providers in an amount determined by Agent as
        sufficient to satisfy the reasonably estimated credit exposure with respect
        to
        the then existing Bank Products.

       

      
        
          
          

        

        
          -43-

          
            

          

        

        
          
          

        

      

      “Bank
        Product Obligations” means all obligations, liabilities, contingent
        reimbursement obligations, fees, and expenses owing by Parent or its
        Subsidiaries to any Bank Product Provider pursuant to or evidenced by the
        Bank
        Product Agreements and irrespective of whether for the payment of money,
        whether
        direct or indirect, absolute or contingent, due or to become due, now existing
        or hereafter arising, and including all such amounts that Parent or its
        Subsidiaries are obligated to reimburse to Agent or any member of the Lender
        Group as a result of Agent or such member of the Lender Group purchasing
        participations from, or executing indemnities or reimbursement obligations
        to, a
        Bank Product Provider with respect to the Bank Products provided by such
        Bank
        Product Provider to Parent or its Subsidiaries.

       

      “Bank
        Product Provider” means Wells Fargo or any of its Affiliates.

       

      “Bank
        Product Reserve” means, as of any date of determination, the lesser of (a)
        $1,000,000 and (b) an
        amount equal to the amount of reserves that Agent has established (based
        upon
        the Bank Product Providers’ reasonable determination of the credit exposure of
        Parent and its Subsidiaries in respect of Bank Products) in respect of Bank
        Products then provided or outstanding.

       

      “Bankruptcy
        Code” means title 11 of the United States Code, as in effect from time to
        time or under any other bankruptcy or insolvency law (including without
        limitation, the Bankruptcy and Insolvency Act (Canada) and the Companies
        Creditors Arrangement Act (Canada)).

       

      “Base
        LIBOR Rate” means the rate per annum, determined by Agent in accordance with
        its customary procedures, and utilizing such electronic or other quotation
        sources as it considers appropriate, to be the rate at which Dollar deposits
        (for delivery on the first day of the requested Interest Period) are offered
        to
        major banks in the London interbank market two (2) Business Days prior to
        the
        commencement of the requested Interest Period, for a term and in an amount
        comparable to the Interest Period and the amount of the LIBOR Rate Loan
        requested (whether as an initial LIBOR Rate Loan or as a continuation of
        a LIBOR
        Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
        Borrower in accordance with the Agreement, which determination shall be
        conclusive in the absence of manifest error; provided that for purposes of
        the
        Term Loan, such rate shall be the rate applicable to the rate on a one-,
        two-,
        three- or six-month LIBOR contract on the relevant date of determination
        and
        shall apply to the entire Term Loan.

       

      “Base
        Rate” means, the rate of interest announced, from time to time, within Wells
        Fargo at its principal office in San Francisco as its “prime rate”, with the
        understanding that the “prime rate” is one of Wells Fargo’s base rates (not
        necessarily the lowest of such rates) and serves as the basis upon which
        effective rates of interest are calculated for those loans making reference
        thereto and is evidenced by the recording thereof after its announcement
        in such
        internal publications as Wells Fargo may designate. Notwithstanding the
        foregoing, if at any time the Base Rate is less than 6.25%, the Base Rate
        shall
        be deemed to be 6.25% until such time as the Base Rate is at least equal
        to
        6.25%.

       

      “Base
        Rate Loan” means the portion of the Advances or the Term Loan that bears
        interest at a rate determined by reference to the Base Rate.

       

      “Base
        Rate Margin” means (i) for purposes of determining the interest rate
        applicable to the Term Loan or upon the occurrence of an event described
        in
Section 2.13(d)(ii), 5.75% and (ii) for purposes of determining the
        interest rate applicable to Base Rate Loans that are Advances, the applicable
        Base Rate Margin set forth in the table below opposite the Borrowing Base
        Utilization on the date of determination:

       

      
        	
                Tier

              	
                Borrowing
                  Base Utilization

              	
                Base
                  Rate Margin for Advances

              
	
                I

              	
                <0.33

              	
                0.75%

              
	
                II

              	
                >=0.33
                  < 0.66

              	
                1.00%

              
	
                III

              	
                >=0.66

              	
                1.25%

              

      

       

      “Benefit
        Plan” means (i) a “defined benefit plan” (as defined in Section 3(35) of
        ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of Borrower
        has
        been an “employer” (as defined in Section 3(5) of ERISA) within the past six (6)
        years or (ii) a “benefit plan” defined under any comparable foreign law that is
        or was sponsored, maintained or contributed to by, or required to be contributed
        by, Parent, any of its Subsidiaries or any of their respective ERISA
        Affiliates.

       

      “Board
        of Directors” means the board of directors (or comparable managers) of
        Borrower or any committee thereof duly authorized to act on behalf of the
        board
        of directors (or comparable managers).

       

      “Borrower”
        has the meaning specified therefor in the preamble to the
        Agreement.

       

      “Borrowing”
        means a borrowing hereunder consisting of Advances made, converted or continued
        on the same day by the Lenders (or Agent on behalf thereof) and, in the case
        of
        Advances that are LIBOR Rate Loans, as to which a single Interest Period
        is in
        effect, or by Swing Lender in the case of a Swing Loan, or by Agent in the
        case
        of a Protective Advance.

       

      “Borrowing
        Base” means, initially, Twenty-Five Million Dollars ($25,000,000), as set
        forth in Section 2.1(c), or such other amount as may be determined pursuant
        to
Section 2.1(d), as the same may be adjusted from time to time pursuant to
Section 5.21(d) or clause (g) of the definition of “Permitted
        Dispositions.”

       

      “Borrowing
        Base Utilization” means the (i) the Revolver Usage divided by (ii) the
        Borrowing Base.

       

      “Business
        Day” means any day that is not a Saturday, Sunday, or other day on which
        banks are authorized or required to close in the state of New York, except
        that,
        if a determination of a Business Day shall relate to a LIBOR Rate Loan, the
        term
“Business Day” also shall exclude any day on which banks are closed for dealings
        in Dollar deposits in the London interbank market.

       

      “Canadian
        Pledge Agreement” means that certain Pledge and Security Agreement dated as
        of the date hereof by Parent in favor of Agent.

       

      “Capital
        Expenditures” means, with respect to any Person for any period, the
        aggregate of all expenditures by such Person and its Subsidiaries during
        such
        period that are capital expenditures as determined in accordance with GAAP,
        whether such expenditures are paid in cash or financed.

      
        
          
          

        

        
          -44-

          
            

          

        

        
          
          

        

      

      “Capitalized
        Lease Obligation” means that portion of the obligations under a Capital
        Lease that is required to be capitalized in accordance with GAAP.

       

      “Capital
        Lease” means a lease that is required to be capitalized for financial
        reporting purposes in accordance with GAAP.

       

      “Cash
        Equivalents” means (a) marketable direct obligations issued by, or
        unconditionally guaranteed by, the United States or issued by any agency
        thereof
        and backed by the full faith and credit of the United States, in each case
        maturing within one (1) year from the date of acquisition thereof, (b)
        marketable direct obligations issued by any state of the United States or
        any
        political subdivision of any such state or any public instrumentality thereof
        maturing within one (1) year from the date of acquisition thereof and, at
        the
        time of acquisition, having one of the two highest ratings obtainable from
        either Standard & Poor’s Rating Group (“S&P”) or Moody’s
        Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no
        more than two hundred seventy (270) days from the date of creation thereof
        and,
        at the time of acquisition, having a rating of at least A-1 from S&P or at
        least P-1 from Moody’s, (d) certificates of deposit, eurodollar-time deposits,
        bankers’ acceptances maturing within one (1) year from the date of acquisition
        thereof either (i) issued by any bank organized under the laws of the United
        States or any state thereof which bank has a rating of A or A2, or better,
        from
        S&P or Moody’s, or (ii) certificates of deposit less than or equal to Fifty
        Thousand Dollars ($50,000) in the aggregate issued by any other bank insured
        by
        the Federal Deposit Insurance Corporation, (e) Deposit Accounts maintained
        with
        (i) any bank that satisfies the criteria described in clause (d)(i)
        above, or (ii) any other bank organized under the laws of the United States
        or
        any state thereof so long as the amount maintained with any such other bank
        is
        less than or equal to One Hundred Thousand Dollars ($100,000) and is insured
        by
        the Federal Deposit Insurance Corporation, (f) Investments in money market
        funds
        substantially all of whose assets are invested in the types of assets described
        in clauses (a) through (e) above, and (g) repurchase obligations with a term
        of
        not more than one (1) year for underlying securities of the types described
        in
        (a) and (c) above entered into with any bank that satisfies the criteria
        described in clause (d)(i) above.

       

      “Cash
        Management Account” has the meaning specified therefor in Section
        2.7(a).

       

      “Cash
        Management Agreements” means those certain cash management agreements, in
        form and substance satisfactory to Agent, each of which is among Borrower
        or one
        of its Subsidiaries, Agent, and one of the Cash Management Banks.

       

      “Cash
        Management Bank” has the meaning specified therefor in Section
        2.7(a).

       

      “Change
        of Control” means that (a) any “person” or “group” (within the meaning of
        Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holder,
        becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
        Act),
        directly or indirectly, of twenty percent (20%), or more, of the Stock of
        Parent
        having the right to vote for the election of members of the Board of Directors
        (or, in the case of Permitted Holder only, the Permitted Holder beneficially
        own, thirty percent (30%) or more of such Stock), (b) a majority of the members
        of the Board of Directors do not constitute Continuing Directors,
        (c) Parent shall cease to beneficially own and control, directly or
        indirectly, 100% on a fully diluted basis each of the aggregate of the economic
        and voting interest in the Stock of Borrower; (d) except to the extent
        constituting a Permitted Disposition or a transaction permitted pursuant
        to
Section 6.3, Borrower shall cease to directly or indirectly beneficially
        own and control 100% on a fully diluted basis of each of the aggregate of
        the
        economic and voting interests in the Stock of any of its Subsidiaries; or
        (e) a
“change of control” under the Convertible Subordinated Notes has
        occurred.

       

      “Closing
        Date” means the date of the making of the Term Loan and the initial Advances
        made on the date hereof.

       

      “Code”
        means the Uniform Commercial Code, as in effect from time to time, in the
        State
        of New York.

       

      “Collateral”
        means all assets and interests in assets and proceeds thereof now owned or
        hereafter acquired by Borrower or its Subsidiaries in or upon which a Lien
        is
        granted under any of the Loan Documents.

       

      “Collateral
        Access Agreement” means a landlord waiver, bailee letter, or acknowledgement
        agreement of any lessor, warehouseman, processor, consignee, or other Person
        in
        possession of, having a Lien upon, or having rights or interests in Parent’s or
        its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in
        form and substance satisfactory to Agent.

       

      “Collections”
        means all cash, checks, notes, instruments, and other items of payment
        (including insurance proceeds, proceeds of cash sales, rental proceeds, and
        tax
        refunds).

       

      “Commitment”
        means, with respect to each Lender, its Revolver Commitment, its Term Loan
        Commitment, or its Total Commitment, as the context requires, and, with respect
        to all Lenders, their Revolver Commitments, their Term Loan Commitments,
        or
        their Total Commitments, as the context requires, in each case as such Dollar
        amounts are set forth beside such Lender’s name under the applicable heading on
Schedule C-1 or in the Assignment and Acceptance pursuant to which such
        Lender became a Lender hereunder, as such amounts may be reduced or increased
        from time to time pursuant to assignments made in accordance with the provisions
        of Section 13.1.

       

      “Common
        Stock” means common stock of Parent, without par value per
        share.

       

      “Compliance
        Certificate” means a certificate substantially in the form of Exhibit
        C-1 delivered by the chief financial officer of Borrower to
        Agent.

       

      “Consolidated
        Net Income” means, with respect to a Person, for any period, such Person’s
        and its Subsidiaries’ gross revenues for such period, including any cash
        dividends or distributions actually received from any other Person during
        such
        period, minus such Person’s and its Subsidiaries’ expenses and other proper
        charges against income (including taxes on income to the extent imposed),
        determined on a consolidated basis after eliminating earnings or losses
        attributable to outstanding minority interests and excluding the net earnings
        of
        any Person other than a Subsidiary in which such Person or any of its
        Subsidiaries has an ownership interest.  Consolidated Net Income shall not
        include: (i) any gain or loss from the sale of assets, (ii) any extraordinary
        gains, (iii) any extraordinary noncash losses, (iv) any non-cash income,
        gains,
        losses or charges resulting from the requirements of SFAS 133, 142, 143 or
        144,
        or (v) any interest expense associated with the Convertible Subordinated
        Notes.

       

      
        
          
          

        

        
          -45-

          
            

          

        

        
          
          

        

      

      “Continuing
        Director” means (a) any member of the Board of Directors who was a director
        (or comparable manager) of Parent on the Closing Date, and (b) any individual
        who becomes a member of the Board of Directors after the Closing Date if
        such
        individual was appointed or nominated for election to the Board of Directors
        by
        a majority of the Continuing Directors, but excluding any such individual
        originally proposed for election in opposition to the Board of Directors
        in
        office at the Closing Date in an actual or threatened election contest relating
        to the election of the directors (or comparable managers) of Parent and whose
        initial assumption of office resulted from such contest or the settlement
        thereof.

       

      “Control
        Agreement” means a control agreement, in form and substance satisfactory to
        Agent, executed and delivered by Parent or one of its Subsidiaries, Agent,
        and
        the applicable securities intermediary (with respect to a Securities Account)
        or
        bank (with respect to a Deposit Account).

       

      “Convertible
        Subordinated Notes” means the Series A Subordinated Convertible Notes due
        March 31, 2012 issued by the Parent on January 30, 2007 and the Series B
        Subordinated Convertible Notes due March 31, 2012 issued by the Parent on
        March
        30, 2007.

       

      “Copyright
        Security Agreement” has the meaning specified therefor in the Security
        Agreement.

       

      “Daily
        Balance” means, as of any date of determination and with respect to any
        Obligation, the amount of such Obligation owed at the end of such
        day.

       

      “Default”
        means an event, condition, or default that, with the giving of notice, the
        passage of time, or both, would, unless cured or waived, become an Event
        of
        Default.

       

      “Defaulting
        Lender” means any Lender that fails to make any Advance (or other extension
        of credit) that it is required to make hereunder on the date that it is required
        to do so hereunder.

       

      “Defaulting
        Lender Rate” means (a) for the first three (3) days from and after the date
        the relevant payment is due, the Base Rate, and (b) thereafter, the interest
        rate then applicable to Advances that are Base Rate Loans (inclusive of the
        Base
        Rate Margin applicable thereto).

       

      “Defensible
        Title” means that record title of Parent or its Subsidiaries which, subject
        to clauses (a), (b), (c), (k) and (m) of the definition of “Permitted Liens”,
        (a) entitles Parent or its Subsidiaries, as applicable, to receive from each
        such Property not less than the interests shown in the Reserve Report as
        the
“Net Revenue Interest” of all Hydrocarbons produced, saved and marketed from or
        allocated to the formations in such Property, all without reduction, suspension
        or termination except as stated in such Reserve Report or otherwise permitted
        as
        Permitted Liens; and (b) obligates Parent or its Subsidiaries, as applicable,
        to
        bear a percentage of the costs and expenses relating to the maintenance and
        development of, and operations relating to, the producing formations in each
        such Property not greater than the “Working Interest” shown in the Reserve
        Report (without a proportionate increase in the Net Revenue Interest), all
        without increase except as stated in such Reserve Report or otherwise permitted
        under clauses (a), (b), (c), (k) and (m) of the definition of “Permitted
        Liens”.

       

      “Deposit
        Account” means any deposit account (as that term is defined in the
        Code).

       

      “Designated
        Account” means the Deposit Account of Borrower identified on Schedule
        D-1.

       

      “Designated
        Account Bank” has the meaning specified therefor in Schedule
        D-1.

       

      “Disbursement
        Letter” means an instructional letter executed and delivered by Borrower to
        Agent and Lenders regarding the extensions of credit to be made on the Closing
        Date, the form and substance of which is satisfactory to Agent.

       

      “Disqualified
        Stock” shall mean any Stock which, by its terms (or by the terms of any
        security into which it is convertible or for which it is exchangeable), or
        upon
        the happening of any event, (a) matures or is mandatorily redeemable,
        pursuant to a sinking fund obligation or otherwise, or is redeemable at the
        option of the holder thereof, in whole or in part, on or prior to the date
        that
        is one hundred eighty (180) days following the Maturity Date, (b) is
        convertible into or exchangeable for (i) debt securities or (ii) any
        Stock referred to in (a) above, in each case at any time on or prior to the
        date that one hundred eighty (180) days following the Maturity Date, or
        (c) is entitled to receive a dividend or distribution (other than for taxes
        attributable to the operations of the business) prior to the time that the
        Obligations are paid in full, or (d) has the benefit of any covenants or
        agreements that restrict the payment of any of the Obligations or that are
        EBITDA or debt-multiple based (i.e. financial covenants).

       

      “Dollars”
        or “$” means United States dollars.

       

      “EBITDA”
        means, for any period (without duplication), the sum of (a) Consolidated
        Net
        Income during such period (excluding all interest income earned or accrued
        during such period that was included in determining such Consolidated Net
        Income), plus (b) all interest paid or accrued during such period on
        Indebtedness (including amortization of original issue discount and the interest
        component of any deferred payment obligations and capital lease obligations)
        that was deducted in determining such Consolidated Net Income, plus (c) all
        income taxes that were deducted in determining such Consolidated Net Income,
        plus (d) all depreciation, depletion expense, amortization expense (including
        amortization of good will and debt issue costs), and other non-cash charges
        (including any provision for the reduction in the carrying value of assets
        recorded in accordance with GAAP and stock option grants, warrants and similar
        non-cash charges) and expenses incurred by Parent and its Subsidiaries that
        were
        deducted in determining such Consolidated Net Income; provided,
however, that any calculation of EBITDA hereunder shall be made
        using an
        EBITDA calculated on a pro forma basis (inclusive of any acquisitions financed
        with Funded Indebtedness, if any, made during the relevant calculation period
        and, if any such acquisition has a value in excess of $500,000, as if such
        acquisition had occurred on the first day of such period); provided,
further, that EBITDA shall be calculated as follows for the first
        three
        fiscal quarters following the Closing Date:

       

      (a)
        for
        the fiscal quarter ending March 31, 2008, EBITDA shall be EBITDA for the
        three-month period ending on such date multiplied by four;

       

      (b)
        for
        the fiscal quarter ending June 30, 2008, EBITDA shall be EBITDA for the
        six-month period ending on such date multiplied by two;

       

      
        
          
          

        

        
          -46-

          
            

          

        

        
          
          

        

      

      (c)
        for
        the fiscal quarter ending September 30, 2008, EBITDA shall be EBITDA for
        the
        nine-month period ending on such date multiplied by 4/3;

       

      Thereafter,
        EBITDA shall be calculated using EBITDA for the period of four (4) fiscal
        quarters ending on the last day of the fiscal quarter immediately preceding
        the
        date of determination for which financial statements are available.

       

      “Eligible
        Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved
        Fund, (d) a commercial bank organized under the laws of the United States,
        or
        any state thereof, and having total assets in excess of $250,000,000, (e)
        a
        commercial bank organized under the laws of any other country which is a
        member
        of the Organization for Economic Cooperation and Development or a political
        subdivision of any such country and which has total assets in excess of
        $250,000,000, provided that such bank is acting through a branch or agency
        located in the United States and (f) a finance company, insurance company,
        or
        other financial institution, or fund that is engaged in making, purchasing,
        or
        otherwise investing in commercial loans in the ordinary course of its business
        and having (together with its Affiliates) total assets in excess of
        $250,000,000; provided that notwithstanding the foregoing and for the avoidance
        of doubt, “Eligible Assignee” shall not include Parent, Borrower, any of
        Parent’s Affiliates or Subsidiaries.

       

      “Engineering
        Reports” has the meaning assigned such term in
Section 2.1(e)(i).

       

      “Environmental
        Actions” means any written complaint, summons, citation, notice, directive,
        demand, suit, order, claim, litigation, governmental investigation, judicial
        or
        administrative proceeding, judgment, letter, or other communication to Parent
        or
        any of its Subsidiaries from any Governmental Authority, or any third party
        alleging violations of Environmental Laws or liability for Response Actions
        with
        respect to Releases (a) at, onto or from any assets, properties, or businesses
        of Parent, its Subsidiaries, including the Real Property, (b) from or onto
        adjoining properties or businesses, or (c) from or onto any facilities which
        received Hazardous Materials generated by Borrower, its
        Subsidiaries.

       

      “Environmental
        Law” means any applicable federal, state, provincial, territorial, foreign
        or local statute, law, rule, regulation, ordinance, code, binding and
        enforceable guideline, binding and enforceable written policy, or rule of
        common
        law now or hereafter in effect and in each case as amended, or any applicable
        judicial or administrative interpretation thereof, including any applicable
        judicial or administrative order, consent decree or judgment, issued by a
        Governmental Authority, in each case, to the extent binding on Parent or
        its
        Subsidiaries, relating to the environment, health and safety, natural resources
        or natural resource damages, or Hazardous Materials, in each case as amended
        from time to time.

       

      “Environmental
        Liabilities” means all liabilities, monetary obligations, losses, damages,
        punitive damages, consequential damages, treble damages, costs and expenses
        (including all reasonable fees, disbursements and expenses of counsel, experts,
        or consultants, and costs of investigation and feasibility studies), fines,
        penalties, sanctions, and interest that arise under Environmental Laws or
        are  incurred as a result of any (i) Environmental Action, (ii)
        Release or (iii) Response Action.

       

      “Environmental
        Lien” means any Lien in favor of any Governmental Authority or Person for
        Environmental Liabilities.

       

      “Environmental
        Permits” has the meaning specified therefor in
Section 4.11(b).

       

      “Equipment”
        means equipment (as that term is defined in the Code).

       

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

       

      “ERISA
        Affiliate” means (a) any Person subject to ERISA whose employees are treated
        as employed by the same employer as the employees of Parent or its Subsidiaries
        under IRC Section 414(b), (b) any trade or business subject to ERISA whose
        employees are treated as employed by the same employer as the employees of
        Parent or its Subsidiaries under IRC Section 414(c), (c) solely for purposes
        of
        Section 302 of ERISA and Section 412 of the IRC, any organization subject
        to
        ERISA that is a member of an affiliated service group of which Parent or
        any of
        its Subsidiaries is a member under IRC Section 414(m), or (d) solely for
        purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject
        to ERISA that is a party to an arrangement with Parent or any of its
        Subsidiaries and whose employees are aggregated with the employees of Parent
        or
        its Subsidiaries under IRC Section 414(o).

       

      “ERISA
        Event” means, with respect to Parent or any of its Subsidiaries or any of
        their ERISA Affiliates, (a) any event described in Section 4043(c) of ERISA
        with
        respect to a Title IV Plan; (b) the withdrawal of any Loan Party or ERISA
        Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a
        plan year in which it was a substantial employer, as defined in Section
        4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Loan Party
        or
        any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice
        of
        intent to terminate a Title IV Plan or the treatment of a plan amendment
        as a
        termination under Section 4041 of ERISA; (e) the institution of proceedings
        to
        terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure
        by
        any Loan Party or ERISA Affiliate to make when due required contributions
        to a
        Multiemployer Plan or Title IV Plan unless such failure is cured within
        30 days; (g) any other event or condition which might reasonably be
        expected to constitute grounds under Section 4042 of ERISA for the termination
        of, or the appointment of a trustee to administer, any Title IV Plan or
        Multiemployer Plan or for the imposition of liability under Section 4069
        or
        4212(c) of ERISA; (h) the termination of a Multiemployer Plan under
        Section 4041A of ERISA or the reorganization or insolvency of a
        Multiemployer Plan under Section 4241 of ERISA; or (i) the loss of a Qualified
        Plan’s qualification or tax exempt status.

       

      “Event
        of Default” has the meaning specified therefor in Section
        7.

       

      “Excess
        Cash Flow” means, with respect to any fiscal period and with respect to
        Parent determined on a consolidated basis in accordance with GAAP (a) EBITDA
        for
        such fiscal period, minus (b) without duplication, the sum of (i) the
        cash portion of Interest Expense paid during such fiscal period, (ii) the
        cash
        portion of income taxes paid during such fiscal period, (iii) all voluntary
        and
        scheduled principal payments made in respect of the Term Loan during such
        fiscal
        period, (iv) the cash portion of Capital Expenditures (net of (y) any proceeds
        reinvested in accordance with the proviso to Section 2.4(c)(iii)(A) of
        the Agreement, and (z) any proceeds of related financings with respect to
        such
        expenditures) made during such period, and (v) the cash portion of interest
        expense paid during the fiscal period of the Convertible Subordinated
        Notes.

       

      “Exchange
        Act” means the Securities Exchange Act of 1934, as in effect from time to
        time.

      
        
          
          

        

        
          -47-

          
            

          

        

        
          
          

        

      

      “Excluded
        Tax” means, with respect to Agent, any Lender, the Issuing Lender or any
        other recipient of any payment to be made by or on account of any obligation
        of
        Borrower hereunder, the following Taxes, including interest, penalties or
        other
        additions thereto: (a) income or franchise taxes imposed on (or measured
        by) its
        gross or net income by the United States of America, or by the jurisdiction
        under the laws of which such recipient is organized or in which its principal
        office is located or, in which it is otherwise deemed to be engaged in a
        trade
        or business for Tax purposes or, in the case of any Lender, in which its
        applicable lending office is located; (b) any branch profits taxes imposed
        by
        the United States of America or any similar tax imposed by any other
        jurisdiction in which Borrower is located; and (c) in the case of a Foreign
        Lender, any withholding tax that is imposed on amounts payable to such Foreign
        Lender at the time such Foreign Lender becomes a party to this Agreement
        (or
        designates a new lending office) or is attributable to such Foreign Lender’s
        failure to comply with Section 16(b), (c) or
(d).

       

      “Existing
        Lender” means JPMorgan Chase Bank, N.A.

       

      “Extraordinary
        Receipts” means any cash received by Parent or any of its Subsidiaries not
        in the ordinary course of business, including (a) Tax Refunds, (b) pension
        plan
        reversions, (c) proceeds of insurance (including key man life insurance and
        business interruption insurance, but excluding any casualty insurance), (d)
        judgments, proceeds of settlements or other consideration of any kind in
        connection with any cause of action, (e) indemnity payments arising out of
        acquisitions, and (f) any purchase price adjustment received in connection
        with
        any purchase agreement following the closing and funding of any applicable
        acquisition with the proceeds of any Advance or the Term Loan in whole or
        in
        part.

       

      “Fee
        Letter” means that certain fee letter between Borrower and Agent, in form
        and substance satisfactory to Agent.

       

      “Force
        Majeure Event” mean any
        act or event not
        within the control of the party claiming suspension, and which, by the exercise
        of due diligence, such party is unable to prevent or overcome, and shall
        include, but not be limited to, acts of God, strikes, lockouts, or industrial
        disputes or disturbances, civil disturbances, arrests and restraints,
        interruptions by government or court order, future orders of any regulatory
        body
        having proper jurisdiction, acts of the public enemy, wars, riots, blockades,
        insurrections, inability
        to secure materials by reason of allocations promulgated by authorized
        governmental agencies, epidemics, landslides, lightning, earthquakes, fires,
        storms, floods, washouts, explosions, breakage or freezing of pipelines,
        electrical power interruptions, inability to obtain permits, easements, 
rights-of-way or materials at reasonable cost, the making of repairs,
        maintenance or alterations to lines or pipe, machinery or plants, interruption
        or curtailment by downstream pipeline, or any other cause whether of the
        kind
        herein enumerated or otherwise, not reasonably within the control of the
        party
        claiming "force majeure"; provided, however, in no event shall the failure
        of,
        or insufficient, gas reserves or gas supply constitute an event of force
        majeure.

       

      “Foreign
        Lender” means any Lender that is organized under the laws of a jurisdiction
        other than the United States of America or any State thereof or the District
        of
        Columbia.

       

      “Fund”
        means any Person (other than a natural person) 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.

       

      “Funded
        Indebtedness” means, as of any date of determination, all Indebtedness for
        borrowed money or letters of credit of Borrower, determined on a consolidated
        basis in accordance with GAAP, that by its terms matures more than one (1)
        year
        after the date of calculation, and any such Indebtedness maturing within
        one (1)
        year from such date that is renewable or extendable at the option of Borrower
        or
        its Subsidiaries, as applicable, to a date more than one (1) year from such
        date, including, in any event, but without duplication, with respect to Borrower
        and its Subsidiaries, the Revolver Usage, the Term Loan and the amount of
        their
        Capital Lease Obligations.

       

      “Funding
        Date” means the date on which a Borrowing occurs.

       

      “Funding
        Losses” has the meaning specified therefor in
Section 2.13(b)(ii).

       

      “GAAP”
        means generally accepted accounting principles as in effect from time to
        time in
        the United States, consistently applied.

       

      “Governing
        Documents” means, with respect to any Person, the certificate or articles of
        incorporation, by-laws, or other organizational documents of such
        Person.

       

      “Governmental
        Authority” means any federal (including, the federal government of Canada),
        state, local, provincial, territorial or other governmental or administrative
        body, instrumentality, board, department, or agency or any court, tribunal,
        administrative hearing body, arbitration panel, commission, or other similar
        dispute-resolving panel or body.

       

      “Guarantors”
        means Parent and each Subsidiary of Borrower and “Guarantor” means any
        one of them; provided, that, if any Subsidiary is a “controlled foreign
        corporation” within the meaning of Section 957 of the IRC, it shall not be
        required to be a Guarantor.

       

      “Guaranty”
        means that certain general continuing guaranty executed and delivered by
        each
        Guarantor in favor of Agent, for the benefit of the Lender Group and the
        Bank
        Product Providers, in form and substance satisfactory to Agent.

       

      “Hazardous
        Materials” means (a) chemical, materials or substances that are regulated
        under any Environmental Law, or defined or listed in, or otherwise classified
        pursuant to, any Environmental Law as “hazardous substances,” “hazardous
        materials,” “hazardous wastes,” “toxic substances,” or any other formulation
        intended to define, list, or classify substances by reason of deleterious
        properties such as ignitability, corrosivity, reactivity, carcinogenicity,
        reproductive toxicity, or “EP toxicity,” (b) oil, petroleum, or petroleum
        derived substances, natural gas, natural gas liquids, synthetic gas, drilling
        fluids, produced waters, and other wastes associated with the exploration,
        development, or production of crude oil, natural gas, or geothermal resources,
        (c) any flammable substances or explosives, (d) any radioactive materials,
        (e)
        asbestos in any form, (f) oil or dielectric fluid containing levels of
        polychlorinated biphenyls in excess of 50 parts per million, (g) lead based
        paint, (h) urea formaldehyde, (i) radon, and (j) pesticides.

       

      “Holdout
        Lender” has the meaning specified therefor in Section
        14.2(a).

      
        
          
          

        

        
          -48-

          
            

          

        

        
          
          

        

      

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

       

      “Hydrocarbons”
        means, collectively, oil, gas, coal seam gas, casinghead gas, condensate,
        distillate, liquid hydrocarbons, gaseous hydrocarbons, all products and
        byproducts refined, separated, settled and dehydrated therefrom and all products
        and byproducts refined therefrom, including, without limitation, kerosene,
        liquefied petroleum gas, refined lubricating oils, diesel fuel, drip gasoline,
        natural gasoline, helium, sulfur, geothermal steam, water, carbon dioxide,
        and
        all other minerals.

       

      “Indebtedness”
        of any Person means, without duplication, (a) all obligations for borrowed
        money, (b) all obligations evidenced by bonds, debentures, notes, or other
        similar instruments and all reimbursement or other obligations in respect
        of
        letters of credit, bankers acceptances, interest rate swaps, or other financial
        products, (c) all obligations as a lessee under Capital Leases, (d) all
        obligations or liabilities of others secured by a Lien on any asset of a
        Person
        or its Subsidiaries, irrespective of whether such obligation or liability
        is
        assumed, (e) all obligations to pay the deferred purchase price of assets
        (other
        than trade payables incurred in the ordinary course of business and repayable
        in
        accordance with customary trade practices provided that such obligations
        are not
        more than ninety (90) days past due), (f) all obligations owing under Swap
        Agreements, (g) all Disqualified Stock, and (h) any obligation guaranteeing
        or
        intended to guarantee (whether directly or indirectly guaranteed, endorsed,
        co-made, discounted, or sold with recourse) any obligation of any other Person
        that constitutes Indebtedness under any of clauses (a) through (g)
        above.

       

      “Indemnified
        Liabilities” has the meaning specified therefor in
Section 10.3.

       

      “Indemnified
        Person” has the meaning specified therefor in Section
        10.3.

       

      “Indemnified
        Taxes” means Taxes other than Excluded Taxes.

       

      “Initial
        Reserve Report” means the report of Netherland, Sewell & Associates,
        Inc. dated June 30, 2007 with respect to the Oil and Gas Properties of Borrower
        and its Subsidiaries.

       

      “Insolvency
        Proceeding” means any proceeding commenced by or against any Person under
        any provision of the Bankruptcy Code or under any other state or federal
        bankruptcy or insolvency law, assignments for the benefit of creditors, formal
        or informal moratoria, compositions, extensions generally with creditors,
        or
        proceedings seeking reorganization, arrangement, or other similar
        relief.

       

      “Intercompany
        Note” means that certain Intercompany Note, dated as of the date hereof, by
        and among Borrower, Parent and the other Guarantors, as may be amended,
        restated, supplemented, renewed, extended, replaced or otherwise modified
        from
        time to time.

       

      “Interim
        Redetermination” has the meaning specified therefor in Section
        2.1(d).

       

      “Interest
        Coverage Ratio” means, with respect to Parent and its Subsidiaries for any
        period, the ratio of EBITDA to Interest Expense for such period.

       

      “Interest
        Expense” means, for any period, the aggregate of the interest expense of
        Parent and its Subsidiaries for such period, determined on a consolidated
        basis
        in accordance with GAAP, less (A) interest expense associated with the
        Convertible Subordinated Notes, and (B) any non cash amounts including, but
        not
        limited to, (i) amortization of debt discount, (ii) amortization of debt
        origination costs and (iii) capitalized interest; provided that Interest
        Expense
        shall be calculated as follows for the first three fiscal quarters following
        the
        Closing Date:

       

      (a)           for
        the fiscal quarter ending March 31, 2008, Interest Expense shall be Interest
        Expense for the three-month period ending on such date multiplied by
        four;

       

      (b)           for
        the fiscal quarter ending June 30, 2008, Interest Expense shall be Interest
        Expense for the six-month period ending on such date multiplied by
        two;

       

      (c)           for
        the fiscal quarter ending September 30, 2008, Interest Expense shall be Interest
        Expense for the nine-month period ending on such date multiplied by
        4/3.

       

      Thereafter,
        Interest Expense shall be calculated using Interest Expense for the period
        of
        four (4) fiscal quarters ending on the last day of the fiscal quarter
        immediately preceding the date of determination for which financial statements
        are available.

       

      “Interest
        Period” means, with respect to (i) each LIBOR Rate Loan (other than the Term
        Loan) a period commencing on the date of the making of such LIBOR Rate Loan
        (or
        the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan
        to a
        LIBOR Rate Loan) and ending one (1), two (2), three (3) or six (6) months
        thereafter; provided, however, that (a) if any Interest Period
        would end on a day that is not a Business Day, such Interest Period shall
        be
        extended (subject to clauses (c)-(e) below) to the next succeeding Business
        Day,
        (b) interest shall accrue at the applicable rate based upon the LIBOR Rate
        from
        and including the first day of each Interest Period to, but excluding, the
        day
        on which any Interest Period expires, (c) any Interest Period that would
        end on
        a day that is not a Business Day shall be extended to the next succeeding
        Business Day unless such Business Day falls in another calendar month, in
        which
        case such Interest Period shall end on the next preceding Business Day, (d)
        with
        respect to an Interest Period that begins on the last Business Day of a calendar
        month (or on a day for which there is no numerically corresponding day in
        the
        calendar month at the end of such Interest Period), the Interest Period shall
        end on the last Business Day of the calendar month that is one (1), two (2),
        three (3) or six (6) months after the date on which the Interest Period began,
        as applicable, and (e) Borrower may not elect an Interest Period which will
        end
        after the Maturity Date and (ii) the Term Loan (a) with respect to the first
        interest payment date, the period from and including the Closing Date to
        and
        including the last day of the calendar quarter in which the Closing Date
        occurs
        and (b) with respect to any subsequent interest payment date, the calendar
        quarter immediately preceding the quarter in which the interest payment occurs;
        provided, that if any Interest Period would otherwise extend beyond the
        Maturity Date for which the interest rate is being calculated, the Interest
        Period shall end on such Maturity Date.

      
        
          
            
            

          

          
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      “Inventory”
        means inventory (as that term is defined in the Code).

       

      “Investment”
        means, with respect to any Person, any investment by such Person in any other
        Person (including Affiliates) in the form of loans, guarantees, advances,
        or
        capital contributions (excluding bona fide Accounts arising in the
        ordinary course of business consistent with past practice), purchases or
        other
        acquisitions of Indebtedness, Stock, or all or substantially all of the assets
        of such other Person (or of any division or business line of such other Person),
        and any other items that are or would be classified as investments on a balance
        sheet prepared in accordance with GAAP.

       

      “IRC”
        means the Internal Revenue Code of 1986, as in effect from time to
        time.

       

      “IRS”
        shall mean the Internal Revenue Service, or any successor thereto.

       

      “Issuing
        Lender” means WFF or any other Lender that, at the request of Borrower and
        with the consent of Agent, agrees, in such Lender’s sole discretion, to become
        an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant
        to Section 2.12.

       

      “L/C”
        has the meaning specified therefor in Section 2.12(a).

       

      “L/C
        Disbursement” means a payment made by the Issuing Lender pursuant to a
        Letter of Credit.

       

      “L/C
        Undertaking” has the meaning specified therefor in Section
        2.12(a).

       

      “Lender”
        and “Lenders” have the respective meanings set forth in the preamble to
        the Agreement, and shall include any other Person made a party to the Agreement
        in accordance with the provisions of Section 13.1.

       

      “Lender
        Agreement” means that certain agreement dated as of the date hereof by and
        between the Lenders.

       

      “Lender
        Group” means, individually and collectively, each of the Lenders (including
        the Issuing Lender) and Agent.

       

      “Lender
        Group Expenses” means all (a) costs or expenses (including taxes, and
        insurance premiums) required to be paid by Parent or its Subsidiaries under
        any
        of the Loan Documents that are paid, advanced, or incurred by the Lender
        Group,
        (b) out-of-pocket fees or charges paid or incurred by Agent in connection
        with
        the Lender Group’s transactions with Parent or its Subsidiaries, including, fees
        or charges for photocopying, notarization, couriers and messengers,
        telecommunication, public record searches (including tax lien, litigation,
        and
        UCC searches and including searches with the patent and trademark office,
        the
        copyright office, or the department of motor vehicles), filing, recording,
        publication, appraisal (including periodic collateral appraisals or business
        valuations to the extent of the fees and charges (and up to the amount of
        any
        limitation) contained in the Agreement or the Fee Letter), real estate surveys,
        real estate title policies and endorsements, and environmental audits, (c)
        out-of-pocket costs and expenses incurred by Agent in the disbursement of
        funds
        to Borrower or other members of the Lender Group (by wire transfer or
        otherwise), (d) charges paid or incurred by Agent resulting from the dishonor
        of
        checks, (e) reasonable out-of-pocket costs and expenses paid or incurred
        by the
        Lender Group to correct any Default or Event of Default or enforce any provision
        of the Loan Documents, or in gaining possession of, maintaining, handling,
        preserving, storing, shipping, selling, preparing for sale, or advertising
        to
        sell the Collateral, or any portion thereof, irrespective of whether a sale
        is
        consummated, (f) out-of-pocket audit fees and expenses of Agent related to
        any
        inspections or audits to the extent of the fees and charges (and up to the
        amount of any limitation) contained in the Agreement or the Fee Letter, (g)
        reasonable costs and expenses of third party claims or any other suit paid
        or
        incurred by the Lender Group in enforcing or defending the Loan Documents
        or in
        connection with the transactions contemplated by the Loan Documents or the
        Lender Group’s relationship with Parent or any its Subsidiaries, (h) Agent’s and
        each Lender’s reasonable out-of-pocket costs and expenses (including attorneys
        fees) incurred in advising, structuring, drafting, reviewing, administering,
        or
        amending the Loan Documents (whether or not consummated), including the
        reasonable costs and expenses of any independent engineers and consultants
        retained by Agent and each Lender in connection herewith, and (i) Agent’s and
        each Lender’s reasonable costs and expenses (including attorneys, accountants,
        consultants, and other advisors fees and expenses) incurred in terminating,
        enforcing (including attorneys, accountants, consultants, and other advisors
        fees and expenses incurred in connection with a “workout,” a “restructuring,” or
        an Insolvency Proceeding concerning Parent or its Subsidiaries or in exercising
        rights or remedies under the Loan Documents), or defending the Loan Documents,
        irrespective of whether suit is brought, or in taking any Remedial Action
        concerning the Collateral.

       

      “Lender-Related
        Person” means, with respect to any Lender, such Lender, together with such
        Lender’s Affiliates, officers, directors, employees, attorneys, and
        agents.

       

      “Letter
        of Credit” means an L/C or an L/C Undertaking, as the context
        requires.

       

      “Letter
        of Credit Collateralization” means either (a) providing cash collateral
        (pursuant to documentation reasonably satisfactory to Agent, including
        provisions that specify that the Letter of Credit fee set forth in the Agreement
        will continue to accrue while the Letters of Credit are outstanding) to be
        held
        by Agent for the benefit of those Lenders with a Revolver Commitment in an
        amount equal to one hundred five percent (105%) of the then existing Letter
        of
        Credit Usage, (b) causing the Underlying Letters of Credit to be returned
        to the
        Issuing Lender, or (c) providing Agent with a standby letter of credit, in
        form
        and substance reasonably satisfactory to Agent, from a commercial bank
        acceptable to Agent (in its sole discretion) in an equal to one hundred five
        percent (105%) of the then existing Letter of Credit Usage (it being understood
        that the Letter of Credit fee set forth in the Agreement will continue to
        accrue
        while the Letters of Credit are outstanding and that any such fee that accrues
        must be an amount that can be drawn under any such standby letter of
        credit).

       

      “Letter
        of Credit Usage” means, as of any date of determination, the aggregate
        undrawn amount of all outstanding Letters of Credit.

       

      “Leverage
        Ratio” means, as of any date of determination (a) the amount of Parent
        and its Subsidiaries’ Funded Indebtedness as of such date, divided by
        (b)  the TTM EBITDA of Parent and its Subsidiaries as of such
        date.

       

      “LIBOR
        Deadline” has the meaning specified therefor in
Section 2.13(b)(i).

       

      “LIBOR
        Notice” means a written notice in the form of Exhibit
        L-1.

      
        
          
          

        

        
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      “LIBOR
        Option” has the meaning specified therefor in Section
        2.13(a).

       

      “LIBOR
        Rate” means, for each Interest Period relating to any LIBOR Rate Loan, the
        rate per annum determined by Agent by dividing (a) the Base LIBOR Rate
        for such Interest Period, by (b) 100% minus the Reserve
        Percentage.  The LIBOR Rate shall be adjusted on and as of the
        effective day of any change in the Reserve Percentage. Notwithstanding the
        foregoing, if at any time the LIBOR Rate is less than 4.8425%, the LIBOR
        Rate
        shall be deemed to be 4.8425% until such time as the LIBOR Rate is at least
        equal to 4.8425%, provided, however, for the avoidance of doubt,
        no change in the LIBOR Rate shall be imposed until the end of the applicable
        Interest Period.

       

      “LIBOR
        Rate Loan” means each portion of an Advance or the Term Loan that bears
        interest at a rate determined by reference to the LIBOR Rate.

       

      “LIBOR
        Rate Margin” means with respect to (a) the Term Loan, 7.00% and (b) any
        Advances, the applicable LIBOR Rate Margin set forth in the table below opposite
        the Borrowing Base Utilization on the date of determination:

       

      
        	
                Tier

              	
                Borrowing
                  Base Utilization

              	
                LIBOR
                  Rate Margin for Advances

              
	
                I

              	
                <0.33

              	
                2.00%

              
	
                II

              	
                >=0.33
                  < 0.66

              	
                2.25%

              
	
                III

              	
                >=0.66

              	
                2.50%

              

      

       

      “Lien”
        means any mortgage, deed of trust, pledge, hypothecation, assignment, charge,
        deposit arrangement, encumbrance, easement, lien (statutory or other), security
        interest, or other security arrangement and any other preference, priority,
        or
        preferential arrangement of any kind or nature whatsoever, including any
        conditional sale contract or other title retention agreement, the interest
        of a
        lessor under a Capital Lease and any synthetic or other financing lease having
        substantially the same economic effect as any of the foregoing, including
        (a)
        any interest in an asset securing an obligation owed to, or a claim by, any
        Person other than the owner of the asset, whether such interest shall be
        based
        on the common law, statute or contract, whether such interest shall be recorded
        or perfected, and whether such interest shall be contingent upon to occurrence
        of some future event or events or the existence of some future circumstance
        or
        circumstances and (b) any of the preceding, in addition to any purchase options,
        reservations, exceptions, encroachments, easements, rights of way, covenants,
        conditions, restrictions, leases and other title exceptions and encumbrances
        affecting any Oil and Gas Properties or Real Property.

       

      “Loan
        Account” has the meaning specified therefor in Section
        2.10.

       

      “Loan
        Documents” means the Agreement, the Bank Product Agreements, the Cash
        Management Agreements, the Control Agreements, the Copyright Security Agreement,
        the Canadian Pledge Agreement, the Fee Letter, the Guaranty, the Lender
        Agreement, the Letters of Credit, the Mortgages, the Patent Security Agreement,
        the Security Agreement, the Trademark Security Agreement, any note or notes
        executed by Borrower in connection with the Agreement and payable to a member
        of
        the Lender Group, and any other agreement entered into, now or in the future,
        by
        Borrower or any of its Subsidiaries and the Lender Group in connection with
        the
        Agreement.

       

      “Loan
        Party” means any Borrower and any Guarantor.

       

      “Margin
        Stock” shall have the meaning specified therefor in Section
        4.2.

       

      “Material
        Adverse Change” means (a) a material adverse change in the business,
        operations, results of operations, assets, liabilities or condition (financial
        or otherwise) of Parent and its Subsidiaries, taken as a whole, (b) a material
        impairment of the ability of Parent and its Subsidiaries, taken as a whole,
        to
        perform their obligations under the Loan Documents to which they are parties
        or
        of the Lender Group’s ability to enforce the Obligations or realize upon the
        Collateral, or (c) a material impairment of the enforceability or priority
        of
        Agent’s Liens with respect to the Collateral as a result of an action or failure
        to act on the part of Parent or its Subsidiaries.

       

      “Material
        Contract” means, with respect to any Person, (i) each contract or agreement
        to which such Person or any of its Subsidiaries is a party that is (A) a
        bond or
        surety obligation or (B) an employment agreement with an officer or a director
        and (ii) all other contracts or agreements to which such Person or any of
        its
        Subsidiaries is a party for which breach, non-performance, cancellation or
        failure to renew could reasonably be expected to result in a Material Adverse
        Change or operate to materially reduce the “Net Revenue Interest” below the
        interest described in the most recently delivered Reserve Report for Proved
        Oil
        and Gas Properties.

       

      “Maturity
        Date” has the meaning specified therefor in Section 3.3.

       

      “Maximum
        Revolver Amount” means Fifty Million Dollars ($50,000,000).

       

      “Moody’s”
        has the meaning specified therefor in the definition of Cash
        Equivalents.

       

      “Mortgages”
        means, individually and collectively, one or more mortgages, deeds of trust,
        or
        deeds to secure debt, executed and delivered by Parent or its Subsidiaries
        in
        favor of Agent, in form and substance satisfactory to Agent, that encumber
        the
        Oil and Gas Properties.

       

      “Multiemployer
        Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of
        ERISA, and to which Borrower, any Subsidiary of Borrower or ERISA Affiliate
        of
        Borrower is making, is obligated to make, has made or been obligated to make,
        contributions on behalf of participants who are or were employed by any of
        them.

       

      
        
          
          

        

        
          -51-

          
            

          

        

        
          
          

        

      

      “Net
        Cash Proceeds” means:

       

      (a)        with
        respect to any sale or disposition by Parent or any of its Subsidiaries of
        property or assets, the amount of cash proceeds (other than escrowed funds
        to
        support obligations reasonably expected to be payable) received (directly
        or
        indirectly) from time to time (whether as initial consideration or through
        the
        payment of deferred consideration) by or on behalf of Parent or its
        Subsidiaries, in connection therewith after deducting therefrom only (i)
        the
        amount of any Indebtedness secured by any Permitted Lien on any asset (other
        than (A) Indebtedness owing to Agent or any Lender under the Agreement or
        the
        other Loan Documents and (B) Indebtedness assumed by the purchaser of such
        asset) which is required to be, and is, repaid in connection with such sale
        or
        disposition, (ii) fees, commissions, and expenses related thereto and required
        to be paid by Parent or such Subsidiary in connection with such sale or
        disposition and (iii) taxes paid or payable to any taxing authorities by
        Parent
        or such Subsidiary in connection with such sale or disposition, in each case
        to
        the extent, but only to the extent, that the amounts so deducted are, at
        the
        time of receipt of such cash, actually paid or payable to a Person that is
        not
        an Affiliate of Parent or any of its Subsidiaries, and are properly attributable
        to such transaction; and

       

      (b)        with
        respect to the issuance or incurrence of any Indebtedness by Parent or any
        of
        its Subsidiaries, or the issuance by Parent or any of its Subsidiaries of
        any
        shares of its Stock, the aggregate amount of cash (other than escrowed funds
        to
        support obligations reasonably expect to be payable) received (directly or
        indirectly) from time to time (whether as initial consideration or through
        the
        payment or disposition of deferred consideration) by or on behalf of Borrower
        or
        such Subsidiary in connection with such issuance or incurrence, after deducting
        therefrom only (i)  fees, commissions, and expenses related thereto and
        required to be paid by Parent or such Subsidiary in connection with such
        issuance or incurrence, (ii) taxes paid or payable to any taxing authorities
        by
        Parent or such Subsidiary in connection with such issuance or incurrence,
        in
        each case to the extent, but only to the extent, that the amounts so deducted
        are, at the time of receipt of such cash, actually paid or payable to a Person
        that is not an Affiliate of Parent or any of its Subsidiaries, and are properly
        attributable to such transaction.

       

      “New
        Borrowing Base Notice” shall have the meaning specified therefor in
Section 2.1(e)(iii)(A).

       

      “Obligations”
        means (a) all loans (including the Term Loan), Advances, debts, principal,
        interest (including any interest that accrues after the commencement of an
        Insolvency Proceeding, regardless of whether allowed or allowable in whole
        or in
        part as a claim in any such Insolvency Proceeding), contingent reimbursement
        obligations with respect to outstanding Letters of Credit, premiums, liabilities
        (including all amounts charged to Borrower’s Loan Account pursuant to the
        Agreement), obligations (including indemnification obligations), fees (including
        the fees provided for in the Fee Letter), charges, costs, Lender Group Expenses
        (including any fees or expenses that accrue after the commencement of an
        Insolvency Proceeding, regardless of whether allowed or allowable in whole
        or in
        part as a claim in any such Insolvency Proceeding), guaranties, covenants,
        and
        duties of any kind and description owing by any Loan Party to the Lender
        Group
        pursuant to or evidenced by the Loan Documents and irrespective of whether
        for
        the payment of money, whether direct or indirect, absolute or contingent,
        due or
        to become due, now existing or hereafter arising, and including all interest
        not
        paid when due and all other expenses or other amounts that any Loan Party
        is
        required to pay or reimburse by the Loan Documents or by law or otherwise
        in
        connection with the Loan Documents, and (b) all Bank Product
        Obligations.  Any reference in the Agreement or in the Loan Documents
        to the Obligations shall include all or any portion thereof and any extensions,
        modifications, renewals, or alterations thereof, both prior and subsequent
        to
        any Insolvency Proceeding.

       

      “Oil
        and Gas Business” means (a) the acquisition, exploration, exploitation,
        development, operation and disposition of interests in Oil and Gas Properties
        and Hydrocarbons, (b) the gathering, marketing, treating, processing,
        storage, selling and transporting of any production from such interests or
        properties, including, without limitation, the marketing of Hydrocarbons
        obtained from unrelated Persons, (c) any business relating to or arising
        from
        exploration for or development, production, treatment, processing, storage,
        transportation or marketing of oil, gas and other minerals and products produced
        in association therewith, (d) any business relating to oilfield sales and
        service, and (e) any activity that is ancillary or necessary or desirable
        to
        facilitate the activities described in clauses (a) through (d) of this
        definition.

       

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

       

      “Originating
        Lender” has the meaning specified therefor in
Section 13.1(e).

       

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

       

      “Overadvance”
        has the meaning specified therefor in Section 2.5.

       

      “Parent”
        means Storm Cat Energy Corporation, a company incorporated under the laws
        of
        British Columbia, Canada.

       

      “Participant”
        has the meaning specified therefor in Section 13.1(e).

       

      “Patent
        Security Agreement” has the meaning specified therefor in the Security
        Agreement.

      
        
          
          

        

        
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      “PBGC”
        shall mean the Pension Benefit Guaranty Corporation or any successor
        thereto.

       

      “Pension
        Plan” shall mean, at any time, an employee benefit plan, as defined in
        Section 3(3) of ERISA, which Parent or any of its Subsidiaries maintains,
        contributes to or has an obligation to contribute to on behalf of participants
        who are or were employed by any Loan Party (or, if such plan were terminated
        at
        such time, would under Section 4069 of ERISA be deemed to be an employee
        benefit
        plan of such Loan Party).

       

      “Permitted
        Discretion” means a determination made in the exercise of reasonable (from
        the perspective of a secured lender) business judgment.

       

      “Permitted
        Dispositions” means (a) sales or other dispositions of Equipment that is
        substantially worn, damaged, surplus or obsolete in the ordinary course of
        business; (b) sales of Inventory to buyers in the ordinary course of business;
        (c) the use or transfer of money or Cash Equivalents in a manner that is
        not
        prohibited by the terms of the Agreement or the other Loan Documents; (d)
        the
        licensing, on a non-exclusive basis, of patents, trademarks, copyrights,
        and
        other intellectual property rights in the ordinary course of business; (e)
        the
        sale of Hydrocarbons in the ordinary course of business; (f) farmouts of
        undeveloped acreage and assignments in connection with such farmouts; (g)
        sales
        or other dispositions of Oil and Gas Properties (or any Subsidiary of Borrower
        possessing one or more Oil and Gas Properties (and no other assets) to the
        extent the disposition satisfies each of the following conditions, including
        the
        limitation on the value of such disposition in subclause (iii) hereof);
provided, that (i) one hundred percent (100%) of the consideration
        received in respect of such sale or other disposition shall be cash or like-kind
        exchange, (ii) the consideration received in respect of such sale or other
        disposition shall be equal to or greater than the fair market value of the
        Oil
        and Gas Property or interest therein subject of such sale or other disposition
        (as reasonably determined by Borrower and, if requested by Agent, Borrower
        shall
        deliver a certificate of a Responsible Officer of Borrower certifying to
        that
        effect), (iii) if such sale or other disposition of Oil and Gas Property
        included in the most recently delivered Reserve Report during any period
        between
        two successive Scheduled Redetermination Dates has a fair market value (as
        determined by Agent), individually or in the aggregate, in excess of One
        Million
        Five Hundred Thousand Dollars ($1,500,000), other than like-kind exchanges
        for
        comparable value, the Borrowing Base shall be reduced, effective immediately
        upon such sale or disposition, by an amount equal to the value, if any, assigned
        such Property as determined by the Required Lenders in the most recently
        delivered Reserve Report and (iv) in no event shall the value of the
        dispositions permitted by subclause (g) hereof exceed, in the aggregate,
        Two
        Million Dollars ($2,000,000) during the term of this Agreement; (h) (i) sales,
        transfers and dispositions of Property (A) by any Guarantor to another Guarantor
        (other than Parent) or to Borrower, including the transfer of Oil and Gas
        Properties into newly created limited partnerships or limited liability
        companies that have become Guarantors in accordance with Section 5.15,
        (ii) the issuance of any Stock in Borrower or any Guarantor (other than Parent)
        to Borrower or any Guarantor and (iii) issuances of Stock upon conversion
        of the
        Convertible Subordinated Notes.

       

      “Permitted
        Holder” means the Person identified on Schedule P-1.

       

      “Permitted
        Investments” means (a) Investments in cash and Cash Equivalents, (b)
        Investments in negotiable instruments for collection, (c) advances made in
        connection with purchases of goods or services in the ordinary course of
        business, (d) Investments received in settlement of amounts due to Parent
        or any
        of its Subsidiaries effected in the ordinary course of business or owing
        to
        Parent or any of its Subsidiaries as a result of Insolvency Proceedings
        involving an Account Debtor or upon the foreclosure or enforcement of any
        Lien
        in favor of Borrower or its Subsidiaries, (e) subject to the limits in
Section 6.6, Investments in direct ownership interests in additional Oil
        and Gas Properties and gas gathering systems related thereto or related to
        farm-out, farm-in, joint operating, joint venture or area of mutual interest
        agreements, gathering systems, pipelines or other similar arrangements which
        are
        usual and customary in the oil and gas exploration and production business
        located within the geographic boundaries of the United States of America;
        provided that for purposes of this clause (e), an investment in capital stock,
        partnership interests, joint venture interests, limited liability company
        interests or other similar equity interests in a Person shall not constitute
        a
        Permitted Investment, (f) commission, travel and similar advances and loans
        to
        employees, officers or directors in the ordinary course of business of the
        Parent or any of its Subsidiaries, in each case only as permitted by applicable
        law, including Section 402 of the Sarbanes Oxley Act of 2002, as amended,
        but in
        any event not to exceed  Twenty Five Thousand Dollars ($25,000) in the
        aggregate at any time, (g) any guarantee permitted under Section 6.1, (h)
        any Swap Agreement permitted under Section 6.24, (i) Investments (1) made
        by the Parent in or to the other Guarantors and (2) made by any Subsidiary
        of
        Borrower in or to the Borrower or any Guarantor (other than Parent), (j)
        deposits in the ordinary course of business to secure the performance of
        (i)
        letters of credit, (ii) bids, tenders, or obtaining of any license from of
        Governmental Authority, (iii) indemnification obligations, or (iv) operating
        leases, and (k) any Oil and Gas Property received in an exchange for another
        Oil
        and Gas Property of the Parent or any of its Subsidiaries in connection with
        a
        Permitted Disposition.

       

      “Permitted
        Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens
        for unpaid taxes, assessments, or other governmental charges or levies that
        either (i) are not yet delinquent, or (ii) (A) either (I) do not have priority
        over Agent’s Liens, or (II) secure taxes, assessments, charges or levies in
        an aggregate amount not in excess of Two Hundred Fifty Thousand Dollars
        ($250,000) and after the Agent establishes reserves against the then-existing
        Borrowing Base or the Maximum Revolver Amount in such aggregate amount and
        at
        least One Dollar ($1.00) of Availability exists, and (B) the underlying taxes,
        assessments, or charges or levies are the subject of Permitted Protests,
        (c)
        judgment Liens that do not constitute an Event of Default under Section
        7.7 of the Agreement, (d) Liens set forth on Schedule P-2, provided
        that any such Lien only secures the Indebtedness that it secures on the Closing
        Date and any Refinancing Indebtedness in respect thereof, (e) the interests
        of
        lessors under operating leases, (f) purchase money Liens or the interests
        of
        lessors under Capital Leases permitted under Section 6.1(c) to the extent
        that such Liens or interests secure Permitted Purchase Money Indebtedness
        and so
        long as (i) such Lien attaches only to the asset purchased, acquired,
        constructed or improved and the proceeds thereof, and (ii) such Lien only
        secures the Indebtedness that was incurred to acquire the asset purchased,
        acquired, constructed or improved or any Refinancing Indebtedness in respect
        thereof, (g) Liens arising by operation of law in favor of warehousemen,
        landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
        in
        the ordinary course of business and not in connection with the borrowing
        of
        money, and which Liens either (i) are for sums not yet delinquent, or (ii)
        are
        the subject of Permitted Protests, (h) Liens on amounts deposited in connection
        with obtaining worker’s compensation or other unemployment insurance, (i) Liens
        on amounts deposited in the ordinary course of business in connection with
        letters of credit, bids, tenders or leases, obtaining any license from a
        Governmental Authority, (j) Liens on amounts deposited as security for surety
        or
        appeal bonds in connection with obtaining such bonds in the ordinary course
        of
        business, (k) with respect to any Real Property, easements, rights of way,
        and
        zoning restrictions and other similar encumbrances that do not materially
        interfere with or impair the use or operation thereof, (l) Liens arising
        solely
        by virtue of any statutory or common law provision relating to banker’s liens,
        rights of set-off or similar rights and remedies and burdening only deposit
        accounts or other funds maintained with a creditor depository institution,
        and
        (m) contractual Liens which arise in the ordinary course of business under
        operating agreements, joint venture agreements, oil and gas partnership
        agreements, oil and gas leases, farm-out agreements, division orders, contracts
        for sale, transportation or exchange of oil and natural gas, unitization
        and
        pooling declarations and agreements, processing agreements, net profits
        agreements, development agreements, gas balancing or deferred production
        agreements, injection, repressuring and recycling agreements, salt water
        or
        other disposal agreements, seismic or other geophysical permits or agreements,
        and other agreements which are usual and customary in the oil and gas business
        and are for claims which are not delinquent or which are being contested
        in good
        faith by appropriate action and for which adequate reserves have been maintained
        in accordance with GAAP, provided that any such Lien referred to in this
        clause
        does not materially impair the use of the Property covered by such Lien for
        the
        purposes of which such Property is held by the Borrower or any of its
        Subsidiaries or materially impair the value of material Property subject
        thereto.

      
        
          
          

        

        
          -53-

          
            

          

        

        
          
          

        

      

      “Permitted
        Protest” means the right of Parent or any of its Subsidiaries to protest any
        Lien (other than any Lien that secures the Obligations), taxes (other than
        payroll taxes or taxes that are the subject of a United States federal tax
        lien), or rental payment, provided that (a) a reserve with respect to such
        obligation is established on Parent’s or its Subsidiaries’ books and records in
        such amount as is required under GAAP, (b) any such protest is instituted
        promptly and prosecuted diligently by Parent or its Subsidiary, as applicable,
        in good faith, and (c) Agent is satisfied that, while any such protest is
        pending, there will be no impairment of the enforceability, validity, or
        priority of any of Agent’s Liens.

       

      “Permitted
        Purchase Money Indebtedness” means, as of any date of determination,
        Purchase Money Indebtedness incurred after the Closing Date in an aggregate
        principal amount outstanding at any one time not in excess of One Million
        Dollars ($1,000,000).

       

      “Person”
        means natural persons, corporations, limited liability companies, limited
        partnerships, general partnerships, limited liability partnerships, joint
        ventures, trusts, land trusts, business trusts, or other organizations,
        irrespective of whether they are legal entities, and governments and agencies
        and political subdivisions thereof.

       

      “Petroleum
        Engineers” means such petroleum engineers of recognized national standing as
        may be selected by Loan Parties with the prior consent of Agent.

       

      “Pro
        Rata Share” means, as of any date of determination:

       

      (a)        with
        respect to a Lender’s obligation to make Advances and right to receive payments
        of principal, interest, fees, costs, and expenses with respect thereto, (i)
        prior to the Revolver Commitments being terminated or reduced to zero, the
        percentage obtained by dividing (y) such Lender’s Revolver Commitment, by (z)
        the aggregate Revolver Commitments of all Lenders, and (ii) from and after
        the
        time that the Revolver Commitments have been terminated or reduced to zero,
        the
        percentage obtained by dividing (y) the aggregate outstanding principal amount
        of such Lender’s Advances by (z) the aggregate outstanding principal amount of
        all Advances,

       

      (b)        with
        respect to a Lender’s obligation to participate in Letters of Credit, to
        reimburse the Issuing Lender, and right to receive payments of fees with
        respect
        thereto, (i) prior to the Revolver Commitments being terminated or reduced
        to
        zero, the percentage obtained by dividing (y) such Lender’s Revolver Commitment,
        by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and
        after the time that the Revolver Commitments have been terminated or reduced
        to
        zero, the percentage obtained by dividing (y) the aggregate outstanding
        principal amount of such Lender’s Advances by (z) the aggregate outstanding
        principal amount of all Advances,

       

      (c)        with
        respect to a Lender’s obligation to make the Term Loan and right to receive
        payments of interest, fees, and principal with respect thereto, (i) prior
        to the
        making of the Term Loan, the percentage obtained by dividing (y) such Lender’s
        Term Loan Commitment, by (z) the aggregate amount of all Lenders’ Term Loan
        Commitments, and (ii) from and after the making of the Term Loan, the percentage
        obtained by dividing (y) the principal amount of such Lender’s portion of the
        Term Loan by (z) the principal amount of the Term Loan, and

       

      (d)        with
        respect to all other matters as to a particular Lender (including the
        indemnification obligations arising under Section 15.7), the percentage
        obtained by dividing (i) such Lender’s Revolver Commitment plus the outstanding
        principal amount of such Lender’s portion of the Term Loan, by (ii) the
        aggregate amount of Revolver Commitments of all Lenders plus the outstanding
        principal amount of the Term Loan; provided, however, that in the
        event the Revolver Commitments have been terminated or reduced to zero, Pro
        Rata
        Share under this clause shall be the percentage obtained by dividing (A)
        the
        outstanding principal amount of such Lender’s Advances plus such Lender’s
        ratable portion of the Risk Participation Liability with respect to outstanding
        Letters of Credit plus the outstanding principal amount of such Lender’s portion
        of the Term Loan, by (B) the outstanding principal amount of all Advances
        plus
        the aggregate amount of the Risk Participation Liability with respect to
        outstanding Letters of Credit plus the outstanding principal amount of the
        Term
        Loan.

       

      “Projections”
        means Parent’s forecasted (a) balance sheets, (b) profit and loss statements,
        and (c) cash flow statements, all prepared on a basis consistent with Parent’s
        historical financial statements, together with appropriate supporting details
        and a statement of underlying assumptions.  The Projections shall also
        contain a forecast of Capital Expenditures for the period covered
        thereby.

       

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

       

      “Proposed
        Borrowing Base” has the meaning specified therefor in Section
        2.1(e)(i).

       

      “Proposed
        Borrowing Base Notice” has the meaning specified therefor in Section
        2.1(e)(ii).

       

      “Protective
        Advances” has the meaning specified therefor in
Section 2.3(d)(i).

       

      “Proved
        Oil and Gas Properties” means Oil and Gas Properties that are Proved
        Reserves.

       

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

       

      “Purchase
        Money Indebtedness” means Indebtedness (other than the Obligations, but
        including Capitalized Lease Obligations), incurred at the time of, or within
        thirty (30) days after, the acquisition, construction or improvement by Borrower
        of any capital or fixed assets for the purpose of financing all or any part
        of
        the acquisition, construction or improvement cost thereof.

      
        
          
          

        

        
          -54-

          
            

          

        

        
          
          

        

      

      “Real
        Property” means any estates or interests in real property owned, leased or
        operated by Parent or its Subsidiaries and the improvements
        thereto.

       

      “Real
        Property Collateral” means the Real Property identified on
Schedule R-1 and any Real Property hereafter acquired by Parent or
        its Subsidiaries.

       

      “Record”
        means information that is inscribed on a tangible medium or that is stored
        in an
        electronic or other medium and is retrievable in perceivable form.

       

      “Redetermination
        Date” means, with respect to any Scheduled Redetermination or any Interim
        Redetermination, the date that the redetermined Borrowing Base related thereto
        becomes effective pursuant to Section 2.1(e)(iii)(A).

       

      “Refinancing
        Indebtedness” means refinancings, renewals, or extensions of Indebtedness so
        long as: (a) the terms and conditions of such refinancings, renewals, or
        extensions do not, in Agent’s reasonable judgment, materially impair the
        prospects of repayment of the Obligations by Borrower or materially impair
        Loan
        Party’s creditworthiness, (b) such refinancings, renewals, or extensions do not
        result in an increase in the principal amount of the Indebtedness so refinanced,
        renewed, or extended, (c) such refinancings, renewals, or extensions do not
        result in an increase in the interest rate with respect to the Indebtedness
        so
        refinanced, renewed, or extended, (d) such refinancings, renewals, or extensions
        do not result in a shortening of the average weighted maturity of the
        Indebtedness so refinanced, renewed, or extended, nor are they on terms or
        conditions that, taken as a whole, are materially more burdensome or restrictive
        to any Loan Party, (e) if the Indebtedness that is refinanced, renewed, or
        extended was subordinated in right of payment to the Obligations, then the
        terms
        and conditions of the refinancing, renewal, or extension must include
        subordination terms and conditions that are at least as favorable to the
        Lender
        Group as those that were applicable to the refinanced, renewed, or extended
        Indebtedness, and (f) the Indebtedness that is refinanced, renewed, or extended
        is not recourse to any Person that is liable on account of the Obligations
        other
        than those Persons which were obligated with respect to the Indebtedness
        that
        was refinanced, renewed, or extended.

       

      “Regiment”
        means Regiment Capital Special Situations Fund III, L.P. together with its
        permitted successors and assigns.

       

      “Release”
        means any spilling, leaking, seepage, pumping, pouring, emitting, emptying,
        discharging, injecting, escaping, leaching, dumping, disposing, depositing,
        dispersing, emanating or migrating of any Hazardous Materials in, into, onto,
        from or through the environment or any Real Property.

       

      “Replacement
        Lender” has the meaning specified therefor in Section
        14.2(a).

       

      “Report”
        has the meaning specified therefor in Section 15.16(a).

       

      “Required
        Availability” means Availability of not less than Twenty Million Dollars
        ($20,000,000).

       

      “Required
        Lenders” means, at any date of determination thereof, collectively, (i)
        Regiment, for so long as it holds at least twenty-five percent (25%) of the
        Term
        Loan, (ii) WFF, for so long as it holds at least twenty-five percent (25%)
        of
        the Revolver Commitment and (iii) such other Lenders whose aggregate Pro
        Rata
        Shares (calculated under clause (d) of the definition of Pro Rata Shares)
        together with those of Regiment and/or WFF (to the extent that each such
        entity
        is deemed a Required Lender) exceed fifty percent (50%).

       

      “Reserve
        Percentage” means, on any day, for any Lender, the maximum percentage
        prescribed by the Board of Governors of the Federal Reserve System (or any
        successor Governmental Authority) for determining the reserve requirements
        (including any basic, supplemental, marginal, or emergency reserves) that
        are in
        effect on such date with respect to eurocurrency funding (currently referred
        to
        as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
        required or directed under applicable regulations to maintain such reserves,
        the
        Reserve Percentage shall be zero.

       

      “Reserve
        Report” means a report, in form and substance reasonably satisfactory to
        Agent, setting forth, as of each January 1st or July 1st (or such other date
        in
        the event of an Interim Redetermination) (a) the volumetric quantity and
        the
        PV-10 of the oil and gas reserves estimated to be attributable to the Oil
        and
        Gas Properties of Parent and its Subsidiaries, together with a projection
        of the
        rate of production and future net income, taxes, operating expenses and capital
        expenditures with respect thereto as of such date, and (b) such other
        information customarily contained in such reports as Agent may reasonably
        request.

       

      “Response
        Action” means all actions taken to (a) clean up, remove, remediate, contain,
        treat, monitor, assess, investigate, evaluate, correct or in any way address
        any
        violation of or non-compliance with Environmental Law, any Environmental
        Liability, any Release or any Hazardous Materials in the indoor or outdoor
        environment, (b) prevent or minimize a release or threatened release of
        Hazardous Materials so they do not migrate or endanger or threaten to endanger
        public health or welfare or the indoor or outdoor environment, (c) restore
        or
        reclaim natural resources or the environment, or (d) perform any pre-remedial
        studies, investigations, or post-remedial operation and maintenance
        activities.

       

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

       

      “Revolver
        Commitment” means, with respect to each Lender, its Revolver Commitment,
        and, with respect to all Lenders, their Revolver Commitments, in each case
        as
        such Dollar amounts are set forth beside such Lender’s name under the applicable
        heading on Schedule C-1 or in the Assignment and Acceptance pursuant to
        which such Lender became a Lender hereunder, as such amounts may be reduced
        or
        increased from time to time pursuant to assignments made in accordance with
        the
        provisions of Section 13.1.

       

      “Revolver
        Usage” means, as of any date of determination, the sum of (a) the amount of
        outstanding Advances, plus (b) the amount of the Letter of Credit
        Usage.

      
        
          
          

        

        
          -55-

          
            

          

        

        
          
          

        

      

      “Risk
        Participation Liability” means, as to each Letter of Credit, all
        reimbursement obligations of Borrower to the Issuing Lender with respect
        to an
        L/C Undertaking, consisting of (a) the amount available to be drawn or which
        may
        become available to be drawn, (b) all amounts that have been paid by the
        Issuing
        Lender to the Underlying Issuer to the extent not reimbursed by Borrower,
        whether by the making of an Advance or otherwise, and (c) all accrued and
        unpaid
        interest, fees, and expenses payable with respect thereto.

       

      “Scheduled
        Redetermination” has the meaning specified therefor in Section
        2.1(d).

       

      “SEC”
        means the United States Securities and Exchange Commission and any successor
        thereto.

       

      “Securities
        Account” means a securities account (as that term is defined in the
        Code).

       

      “Security
        Agreement” means a security agreement, in form and substance satisfactory to
        Agent, executed and delivered by Borrower and Guarantors to Agent.

       

      “Security
        Documents” means the Cash Management Agreements, the Control
        Agreements,  the Security Agreement, Canadian Pledge Agreement,
        Copyright Security Agreement, Patent Security Agreement and Trademark Security
        Agreement.

       

      “Settlement”
        has the meaning specified therefor in Section 2.3(e)(i).

       

      “Settlement
        Date” has the meaning specified therefor in Section
        2.3(e)(i).

       

      “Solvent”
        means, with respect to any Person on a particular date, that, at fair
        valuations, the sum of such Person’s assets is greater than all of such Person’s
        debts.

       

      “S&P”
        has the meaning specified therefor in the definition of Cash
        Equivalents.

       

      “Stock”
        means all shares, options, warrants, interests, participations, or other
        equivalents (regardless of how designated) of or in a Person, whether voting
        or
        nonvoting, including common stock, preferred stock, or any other “equity
        security” (as such term is defined in Rule 3a11-1 of the General Rules and
        Regulations promulgated by the SEC under the Exchange Act).

       

      “Subordination
        and Intercreditor Agreement” means that certain Subordination and
        Intercreditor Agreement by and among JP Morgan Chase Bank, N.A. and the other
        signatories thereto.

       

      “Subsidiary”
        of a Person means a corporation, partnership, limited liability company,
        or
        other entity in which that Person directly or indirectly owns or controls
        the
        shares of Stock having ordinary voting power to elect a majority of the board
        of
        directors (or appoint other comparable managers) of such corporation,
        partnership, limited liability company, or other entity.

       

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

       

      “Swing
        Lender” means WFF or any other Lender that, at the request of Borrower and
        with the consent of Agent agrees, in such Lender’s sole discretion, to become
        the Swing Lender under Section 2.3(b).

       

      “Swing
        Loan” has the meaning specified therefor in Section
        2.3(b).

       

      “Tax
        Refund” means foreign, United States, state or local tax
        refunds.

       

      “Taxes”
        means shall mean, any taxes, levies, imposts, duties, fees, assessments or
        other
        charges of whatever nature now or hereafter imposed by any jurisdiction or
        by
        any political subdivision or taxing authority thereof or therein with respect
        to
        such payments (but excluding any tax imposed by any jurisdiction or by any
        political subdivision or taxing authority thereof or therein measured by
        or
        based on the net income or net profits of any Lender) and all interest,
        penalties or similar liabilities with respect thereto.

       

      “Term
        Loan” has the meaning specified therefor in Section 2.2.

       

      “Term
        Loan Amount” means Thirty Million Dollars ($30,000,000).

       

      “Term
        Loan Commitment” means, with respect to each Lender, its Term Loan
        Commitment, and, with respect to all Lenders, their Term Loan Commitments,
        in
        each case as such Dollar amounts are set forth beside such Lender’s name under
        the applicable heading on Schedule C-1 or in the Assignment and
        Acceptance pursuant to which such Lender became a Lender hereunder, as such
        amounts may be reduced or increased from time to time pursuant to assignments
        made in accordance with the provisions of Section 13.1.

       

      
        
          
          

        

        
          -56-

          
            

          

        

        
          
          

        

      

      “Total
        Commitment” means, with respect to each Lender, its Total Commitment, and,
        with respect to all Lenders, their Total Commitments, in each case as such
        Dollar amounts are set forth beside such Lender’s name under the applicable
        heading on Schedule C-1 attached hereto or on the signature page of the
        Assignment and Acceptance pursuant to which such Lender became a Lender
        hereunder, as such amounts may be reduced or increased from time to time
        pursuant to assignments made in accordance with the provisions of Section
        13.1.

       

      “Total
        Debt” means, at any date, all Indebtedness, except for Letters of Credit, of
        the Parent and its Subsidiaries on a consolidated basis, excluding (i) non-cash
        obligations under FAS 133 or 143, (ii) all obligations owing under Swap
        Agreements, (iii) accounts payable and other accrued liabilities (for the
        deferred purchase price of property or services) from time to time incurred
        in
        the ordinary course of business which are not greater than sixty (60) days
        past
        the date of invoice or delinquent or which are being contested in good faith
        by
        appropriate action and for which adequate reserves have been maintained in
        accordance with GAAP, (iv) all obligations related to the Convertible
        Subordinated Notes.

       

      “Total
        Reserve Value” means, with respect to any Proved Reserves expected to be
        produced from any Oil and Gas Properties, the net present value, discounted
        at
        ten percent (10%) per annum, of the future net revenues expected to accrue
        to
        the Parent’s and its Subsidiaries’ during the remaining expected economic lives
        of such reserves, as estimated in the most recently delivered Reserve Report
        with respect to such Oil and Gas Properties.  Each calculation of such
        expected future net revenues shall be made in accordance with the then existing
        standards of the Society of Petroleum Engineers; provided, that in any
        event (a) appropriate deductions shall be made for estimated severance and
        ad
        valorem taxes, and for estimated operating, gathering, transportation,
        marketing, capital and capital expenditure costs required for the production
        and
        sale of such reserves, (b) appropriate adjustments shall be made for hedging
        operations, provided that Swap Agreements with non-investment grade
        counterparties shall not be taken into account to the extent that such Swap
        Agreements improve the position of or otherwise benefit the Borrower or any
        of
        its Subsidiaries, (c) the pricing assumptions used in determining Total Reserve
        Value for any particular reserves shall be based upon the following price
        decks:
        (i) for natural gas, the lesser of (A) 85% of Platts’ Inside FERC Gas
        Market Report – index futures price for the nearest market index point and
        (B) $6.00/Mcf, and (ii) for crude oil, the lesser of (A) 85% of West Texas
        Intermediate crude oil from the New York Mercantile Exchange for Cushing,
        Oklahoma futures price, and (B) $65.00/Bbl and (d) the cash-flows derived
        from the pricing assumptions set forth in clauses (b) and (c) above shall
        be
        further adjusted to account for heat content, gas shrinkage, transportation
        costs, gathering and compression charges, Btu adjustments, basis differentials
        and other historical adjustments, in each case, in a manner acceptable to
        Agent
        and estimated on the basis of the information available to Borrower;
provided that for purposes of this calculation, Proved Developed Reserves
        shall constitute not less than 60% of the Total Reserve Value.

       

      “Trademark
        Security Agreement” has the meaning specified therefor in the Security
        Agreement.

       

      “Triggering
        Event” means, as of any date of determination, the occurrence of an Event of
        Default.

       

      “TTM
        EBITDA” means, as of any date of determination, EBITDA of Parent determined
        on a consolidated basis in accordance with GAAP, for the twelve (12)-month
        period most recently ended.

       

      “Underlying
        Issuer” means a third Person which is the beneficiary of an L/C Undertaking
        and which has issued a letter of credit at the request of the Issuing Lender
        for
        the benefit of Borrower.

       

      “Underlying
        Letter of Credit” means a letter of credit that has been issued by an
        Underlying Issuer.

       

      “Unfunded
        Pension Liability” shall mean, at any time, the aggregate amount, if any, of
        the sum of (a) the amount by which the present value of all accrued benefits
        under each Title IV Plan exceeds the fair market value of all assets of such
        Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
        all determined as of the most recent valuation date for each such Title IV
        Plan
        using the actuarial assumptions for funding purposes in effect under such
        Title
        IV Plan, and (b) for a period of five (5) years following a transaction which
        might reasonably be expected to be covered by Section 4069 of ERISA, the
        liabilities (whether or not accrued) that could be avoided by any Loan Party
        or
        any ERISA Affiliate as a result of such transaction.

       

      “United
        States” means the United States of America.

       

      “Voidable
        Transfer” has the meaning specified therefor in Section
        17.8.

       

      “Wells
        Fargo” means Wells Fargo Bank, National Association, a national banking
        association.

       

      “WFF”
        means Wells Fargo Foothill, LLC, a Delaware limited liability
        company.

       

      
        
          
          

        

        
          -57-

          
            

          

        

        
          
          

        

      

       

      Schedule
        5.2

       

      Collateral
        Reporting

       

          Provide
        Agent
        (with copies for each Lender) with each of the documents set forth below
        at the
        following times in form satisfactory to Agent:

       

      

      
        	
                Quarterly
                  (as soon as possible and in any event not later than forty-five
                  (45) days
                  after end of each quarter)

              	 	
                (a)  lease
                  operating statements as historically reported by Parent on a consolidated
                  basis, showing (i) the gross proceeds from the sale of Hydrocarbon
                  products produced from any of the Oil and Gas Properties of Parent
                  and its
                  Subsidiaries, (ii) the quantity of Hydrocarbon products sold, (iii)
                  the
                  aggregate severance, ad valorem, conservation, gross production,
                  or other
                  production related taxes deducted from or paid out of the proceeds,
                  and
                  (iv) the lease operating expenses;

                 

                 

              
	
                On
                  or before March 3 and September 3 of each fiscal year of Borrower,
                  pursuant to Sections 5.20 and 5.21

              	 	
                (b)  (i)
                  a Reserve Report, prepared by (A) in the case of the Reserve Report
                  due
                  March 1, Netherland, Sewell & Associates, Inc. or another qualified
                  independent third party Petroleum Engineer reasonably acceptable
                  to Agent,
                  and (B) in the case of the Reserve Report due September 1, the
                  chief
                  engineer or chief operating officer of Borrower and its Subsidiaries,
                  in
                  each case in accordance with the procedures used in the Initial
                  Reserve
                  Report, and together with each such Reserve Report, a certificate
                  of a
                  Responsible Officer certifying as to the matters required under
                  Section
                  5.20(c) and attaching such exhibits as are required by Section
                  5.20(c) and
                  (ii) such title information in respect of the Oil and Gas Properties
                  of
                  Borrower and its Subsidiaries as is required by Section 5.21 in
                  respect of
                  at least eighty percent (80%) of the Total Reserve Value of the
                  Proved Oil
                  and Gas Properties evaluated by the Reserve Report described in
                  clause
                  (i);

                 

              
	
                Promptly
                  upon request by Agent

              	 	
                (c)  notification
                  of prepayment of Hydrocarbons by any customer of Borrower or any
                  of its
                  Subsidiaries, together with a reasonably detailed summary of the
                  terms of
                  such transaction, including, without limitation, the amount of
                  such
                  prepayment, the quantity of Hydrocarbons to be delivered, the delivery
                  schedule of such Hydrocarbons and such other information as may
                  be
                  reasonably requested by Agent;

                 

                (d)  proof
                  of payment of applicable Taxes, including Real Property, ad valorem
                  and production Taxes; and

                 

                (e)  such
                  other reports as to the Collateral of Borrower or any of its Subsidiaries,
                  as Agent may reasonably request.

                 

              

      

      

      

      
        
          
          

        

        
          -58-

          
            

          

        

        
          
          

        

      

      

      
        Schedule
          5.3

         

        Financial
          Statements; Reports; Certificates

         

        Deliver
          to Agent, with copies to each
          Lender, each of the financial statements, reports, or other items set forth
          set
          forth below at the following times in form satisfactory to Agent:

        

        
          	
                  Monthly
                    (as soon as possible and in any event within ten (10) days following
                    receipt by Borrower of reports from swap counterparties)

                   

                	 	
                  (a)  a
                    report setting forth as of the last Business Day of such month,
                    a summary
                    of its hedging positions under all Swap Agreements (including
                    commodity
                    price swap agreements, forward agreements or contracts of sale
                    which
                    provide for prepayment for deferred shipment or delivery of Hydrocarbons
                    of Parent or any of its Subsidiaries), including the type, term,
                    effective
                    date, termination date and notional principal amounts or volumes,
                    the
                    hedged price(s), interest rate(s) or exchange rate(s), as applicable,
                    the
                    net market to marked value thereof and any credit support agreements
                    relating thereto (including any margin required or supplied),
                    and the
                    counterparty to each such agreement;

                   

                
	
                  as
                    soon as available, but in any event within thirty (30) days (for
                    each
                    month that is not the end of one of Borrower’s fiscal quarters) after the
                    end of each month during each of Borrower’s fiscal years

                   

                	 	
                  (b)   report
                    setting forth, on a consolidated basis, for the trailing twelve
                    (12)
                    months, the volume of production and sales attributable to production
                    (and
                    the prices at which such sales were made and the revenues derived
                    from
                    such sales) for each such calendar month from the Oil and Gas
                    Properties,
                    and setting forth the (i) aggregate related ad valorem, severance
                    and
                    production taxes, lease operating expenses, (ii) Capital Expenditures,
                    (iii) Total Debt and (iv) estimated EBITDA attributable thereto
                    and
                    incurred for each such month presented; and

                   

                  (c)  a
                    summary aging, by vendor, of all accounts payable of Parent and
                    its
                    Subsidiaries and any book overdraft, including lease operating
                    expenses
                    and royalty payments, together with such other documentation
                    as my
                    reasonably be requested by Agent, to demonstrate that such royalty
                    payments are being paid on a timely basis;

                   

                
	
                  as
                    soon as available, but in any event within forty-five (45) days
                    after the
                    end of each of the first three fiscal quarters during each of
                    Borrower’s
                    fiscal years

                   

                	 	
                  (d)  an
                    unaudited consolidated balance
                    sheet, income statement, and statement of cash flow covering
                    the
                    operations of Parent and its Subsidiaries during such quarterly
                    period,
                    and that portion of the fiscal year ending as of the close of
                    such quarter
                    and providing (i) a comparison to the corresponding period in
                    the prior
                    fiscal year, and (ii) a management report describing the performance
                    of
                    Parent and its Subsidiaries for such fiscal quarter and such
                    period of the
                    fiscal year then ended and explaining any variances between such
                    results
                    and the results for the comparable quarter and fiscal period
                    in the prior
                    year and the Projections delivered to Agent hereunder; provided,
                    that so
                    long as Borrower shall be a reporting company under the Securities
                    Exchange Act of 1934, as amended, the requirement to provide
                    the
                    information required under clauses (i) and (ii) above shall be
                    satisfied
                    to the extent Borrower complies with the requirements pursuant
                    to clause
                    (i) below; and

                   

                  (e)  a
                    Compliance
                    Certificate;

                   

                
	
                  as
                    soon as available, but in any event within ninety (90) days after
                    the end
                    of each of Borrower’s fiscal years

                   

                	 	
                  (f)  consolidated
                    financial statements
                    of Parent and its Subsidiaries for each such fiscal year, audited
                    by Hein
                    & Associates LLP or another independent certified public accountants
                    reasonably acceptable to Agent and certified, without any (A)
“going
                    concern” or like qualification or exception, or (B) qualification or
                    exception as to the scope of such audit, by such accountants
                    to have been
                    prepared in accordance with GAAP (such audited financial statements
                    to
                    include a balance sheet, income statement, and statement of cash
                    flow and,
                    if prepared, such accountants’ letter to management); and

                   

                  (g)  a
                    Compliance
                    Certificate;

                   

                
	
                  within
                    fifteen (15) days prior to the start of each of Borrower’s fiscal
                    years,

                	 	
                  (h)  copies
                    of Parent and its
                    Subsidiaries’ Projections, in form and with underlying assumptions
                    satisfactory to Agent, in its Permitted Discretion, for the forthcoming
                    three (3) years, year by year, and for the forthcoming fiscal
                    year, month
                    by month, certified by the chief financial officer of Borrower
                    as being
                    such officer’s good faith estimate of the financial performance of Parent
                    and its Subsidiaries on a consolidated basis during the period
                    covered
                    thereby, subject to the same qualifications as those contained
                    in the
                    second sentence of Section 4.15 of the Credit Agreement with
                    respect to
                    the Projections delivered on the Closing Date;

                   

                
	
                  if
                    and when filed by Parent (or the Borrower, as applicable), notice
                    of any
                    of the following,

                	 	
                  (i)  Form
                    10-Q quarterly reports, Form
                    10-K annual reports, and Form 8-K current reports;

                   

                  (j)  any
                    other material public filings
                    made by Parent or the Borrower, as applicable, with the SEC or
                    any
                    corresponding Canadian or provincial Governmental Authority to
                    the extent
                    not duplicative of SEC filings;

                   

                  (k)  any
                    other information that is
                    provided by Parent to its shareholders generally;

                   

                

        

        
          

          
            
              
              

            

            
              -59-

              
                

              

            

            
              
              

          

        

        
          	
                  promptly,
                    but in any event within five (5) days after any Loan Party has
                    knowledge
                    of (i) any event or condition that constitutes a Default or an
                    Event of
                    Default, and (ii) any termination or cancellation of any Material
                    Contract
                    that could reasonably be expected to result in a Material Adverse
                    Change,
                    in each case, that does not otherwise constitute a Default or
                    an Event of
                    Default,

                   

                   

                	 	
                  (l)  notice
                    of such event or condition
                    and a statement of the curative action that such Loan Party proposes
                    to
                    take with respect thereto;

                   

                

        

         

        
          	
                  promptly
                    after the commencement thereof, but in any event within five
                    (5) days
                    after the service of process with respect thereto on any Loan
                    Party,

                   

                	 	
                  (m)  notice
                    of all actions, suits, or
                    proceedings brought by or against Parent or any of its Subsidiaries
                    before
                    any Governmental Authority in which the party bringing such action,
                    suit
                    or proceeding seeks damages in excess of Two Hundred Fifty Thousand
                    Dollars ($250,000) or seeks injunctive relief or alleges any
                    violation of
                    any Environmental Law or seeks remedies in connection with any
                    Environmental Liabilities;

                   

                   

                
	
                  promptly
                    upon the request of Agent,

                   

                	 	
                  (l)  copies
                    of all management letters,
                    exception reports or similar reports or letters received by Parent
                    and its
                    Subsidiaries from its independent certified public accountants
                    in
                    connection with the preparation or filing of Form 10-Q quarterly
                    reports
                    and Form 10-K annual reports or similar reports in connection
                    with the
                    Parent being a Canadian public company;

                   

                  (m)  copies
                    of any material notice or other correspondence sent to, or received
                    from,
                    any Governmental Authority related to the Oil and Gas Properties
                    of Parent
                    or any of its Subsidiaries, including, without limitation, notice
                    of any
                    new plugging and abandonment or other performance or other assurance
                    bond
                    requirements related to such Oil and Gas Properties;

                   

                  (n)  copies
                    of any material notices or
                    notices of default that Parent or any of its Subsidiaries receives
                    from or
                    sends to any person in connection with any Material Contract;

                   

                   

                
	
                  Contemporaneously
                    with the delivery of each Compliance Certificate pursuant to
                    the Credit
                    Agreement,

                	 	
                  (o)  any
                    amendments or modifications,
                    waivers or other changes to any Material Contract;

                   

                   

                
	
                  upon
                    the request of Agent or any Lender,

                   

                	 	
                  (p)  any
                    other information reasonably
                    requested relating to the financial condition of Parent or any
                    of its
                    Subsidiaries.

                   

                

        

         -60-

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