Document:

CREDIT
        AGREEMENT

    

     

    Dated
      as of

     

    

      SEPTEMBER
        2,
        2005

    

     

    among

     

    

      CROSSPOINT
        ENERGY
        HOLDINGS,
        LLC

    

     

    as
      Borrower,

     

    

      D.
        B.
        ZWIRN
        SPECIAL
        OPPORTUNITIES
        FUND,
        L.P.,

    

    as
      Administrative Agent,

     

    and

    

      THE
        LENDERS
        PARTY
        HERETO

    

     

    Sole
      Lead Arranger

    
      PETROBRIDGE
        INVESTMENT
        MANAGEMENT
        LLC

    

     

    
      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

     

    
      
        

          
            	 	
                    Page

                  
	
                    ARTICLE
                      I DEFINITIONS AND ACCOUNTING MATTERS

                  	
                    1

                  
	
                    Section
                      1.01

                  	
                    Terms
                      Defined Above

                  	
                    1

                  
	
                    Section
                      1.02

                  	
                    Certain
                      Defined Terms

                  	
                    1

                  
	
                    Section
                      1.03

                  	
                    Terms
                      Generally; Rules of Construction

                  	
                    17

                  
	
                    Section
                      1.04

                  	
                    Accounting
                      Terms and Determinations; GAAP

                  	
                    17

                  
	 	 
	
                    ARTICLE
                      II COMMITMENT

                  	
                    17

                  
	
                    Section
                      2.01

                  	
                    Loan;
                      Funding of Development Projects, Loans

                  	
                    17

                  
	
                    Section
                      2.02

                  	
                    Borrowings

                  	
                    18

                  
	
                    Section
                      2.03

                  	
                    Use
                      of Proceeds

                  	
                    19

                  
	
                    Section
                      2.04

                  	
                    Fees

                  	
                    20

                  
	
                    Section
                      2.05

                  	
                    Notes

                  	
                    20

                  
	 	 
	
                    ARTICLE
                      III PAYMENTS OF PRINCIPAL AND INTEREST

                  	
                    21

                  
	
                    Section
                      3.01

                  	
                    Repayment
                      of Loans

                  	
                    21

                  
	
                    Section
                      3.02

                  	
                    Interest

                  	
                    22

                  
	
                    Section
                      3.03

                  	
                    Prepayments

                  	
                    22

                  
	
                    Section
                      3.04

                  	
                    Mandatory
                      Repayments

                  	
                    22

                  
	 	 
	
                    ARTICLE
                      IV PAYMENTS; PRO RATA TREATMENT; SHARING OF
                      SET-OFFS.

                  	
                    23

                  
	
                    Section
                      4.01

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

                  	
                    23

                  
	
                    Section
                      4.02

                  	
                    Presumption
                      of Payment by the Borrower

                  	
                    24

                  
	
                    Section
                      4.03

                  	
                    Certain
                      Deductions by the Administrative Agent

                  	
                    24

                  
	 	 
	
                    ARTICLE
                      V INCREASED COSTS; TAXES

                  	
                    24

                  
	
                    Section
                      5.01

                  	
                    Increased
                      Costs

                  	
                    24

                  
	
                    Section
                      5.02

                  	
                    Taxes

                  	
                    25

                  
	 	 
	
                    ARTICLE
                      VI LOCKBOX PROCEDURES; CASUALTY PROCEEDS

                  	
                    26

                  
	
                    Section
                      6.01

                  	
                    Lockbox
                      Account

                  	
                    26

                  
	
                    Section
                      6.02

                  	
                    Notice

                  	
                    27

                  
	
                    Section
                      6.03

                  	
                    Casualty
                      Proceeds

                  	
                    28

                  
	 	 
	
                    ARTICLE
                      VII CONDITIONS PRECEDENT

                  	
                    28

                  
	
                    Section
                      7.01

                  	
                    Initial
                      Funding

                  	
                    28

                  
	
                    Section
                      7.02

                  	
                    Subsequent
                      Fundings

                  	
                    30

                  
	
                    Section
                      7.03

                  	
                    All
                      Fundings

                  	
                    30

                  
	
                    Section
                      7.04

                  	
                    Conditions
                      Precedent for the Benefit of the Lender

                  	
                    30

                  
	
                    Section
                      7.05

                  	
                    No
                      Waiver

                  	
                    30

                  
	 	 
	
                    ARTICLE
                      VIII REPRESENTATIONS AND WARRANTIES

                  	
                    31

                  
	
                    Section
                      8.01

                  	
                    Organization;
                      Powers

                  	
                    31

                  
	
                    Section
                      8.02

                  	
                    Authority;
                      Enforceability

                  	
                    31

                  
	
                    Section
                      8.03

                  	
                    Approvals;
                      No Conflicts

                  	
                    31

                  
	
                    Section
                      8.04

                  	
                    Financial
                      Condition; No Material Adverse Change

                  	
                    31

                  
	
                    Section
                      8.05

                  	
                    Litigation

                  	
                    32

                  
	
                    Section
                      8.06

                  	
                    Environmental
                      Matters

                  	
                    32

                  

          

           

          
            
              
              

            

            
              i

              
                

              

            

            
              
              

            

          

           

          
            	
                    Section
                      8.07

                  	
                    Compliance
                      with the Laws and Agreements; No Defaults

                  	
                    33

                  
	
                    Section
                      8.08

                  	
                    Investment
                      Company Act

                  	
                    34

                  
	
                    Section
                      8.09

                  	
                    Public
                      Utility Holding Company Act

                  	
                    34

                  
	
                    Section
                      8.10

                  	
                    Taxes

                  	
                    34

                  
	
                    Section
                      8.11

                  	
                    ERISA

                  	
                    34

                  
	
                    Section
                      8.12

                  	
                    Disclosure;
                      No Material Misstatements

                  	
                    35

                  
	
                    Section
                      8.13

                  	
                    Insurance

                  	
                    35

                  
	
                    Section
                      8.14

                  	
                    Restriction
                      on Liens

                  	
                    36

                  
	
                    Section
                      8.15

                  	
                    Subsidiaries

                  	
                    36

                  
	
                    Section
                      8.16

                  	
                    Location
                      of Business and Offices

                  	
                    36

                  
	
                    Section
                      8.17

                  	
                    Properties;
                      Titles, Etc

                  	
                    36

                  
	
                    Section
                      8.18

                  	
                    Maintenance
                      of Properties

                  	
                    37

                  
	
                    Section
                      8.19

                  	
                    Gas
                      Imbalances, Prepayments

                  	
                    38

                  
	
                    Section
                      8.20

                  	
                    Marketing
                      of Production

                  	
                    
                      38

                    

                  
	
                    Section
                      8.21

                  	
                    Swap
                      Agreements

                  	
                    
                      38

                    

                  
	
                    Section
                      8.22

                  	
                    Use
                      of Loans

                  	
                    
                      38

                    

                  
	
                    Section
                      8.23

                  	
                    Solvency

                  	
                    
                      38

                    

                  
	
                    Section
                      8.24

                  	
                    Casualty
                      Events

                  	
                    
                      38

                    

                  
	
                    Section
                      8.25

                  	
                    Material
                      Agreements

                  	
                    
                      38

                    

                  
	
                    Section
                      8.26

                  	
                    No
                      Brokers

                  	
                    39

                  
	
                    Section
                      8.27

                  	
                    Reliance

                  	
                    
                      39

                    

                  
	
                    Section
                      8.28

                  	
                    Investments
                      and Guaranties

                  	
                    
                      39

                    

                  
	
                    Section
                      8.29

                  	
                    Payments
                      by Purchasers of Production

                  	
                    
                      39

                    

                  
	
                    Section
                      8.30

                  	
                    Existing
                      Accounts Payable

                  	
                    
                      39

                    

                  
	 	 
	
                    ARTICLE
                      IX AFFIRMATIVE COVENANTS

                  	
                    40

                  
	
                    Section
                      9.01

                  	
                    Financial
                      Statements; Other Information

                  	
                    40

                  
	
                    Section
                      9.02

                  	
                    Notices
                      of Material Events

                  	
                    43

                  
	
                    Section
                      9.03

                  	
                    Existence;
                      Conduct of Business

                  	
                    44

                  
	
                    Section
                      9.04

                  	
                    Payment
                      of Obligations

                  	
                    
                      44

                    

                  
	
                    Section
                      9.05

                  	
                    Performance
                      of Obligations under Loan Documents

                  	
                    
                      44

                    

                  
	
                    Section
                      9.06

                  	
                    Operation
                      and Maintenance of Properties

                  	
                    
                      44

                    

                  
	
                    Section
                      9.07

                  	
                    Insurance

                  	
                    45

                  
	
                    Section
                      9.08

                  	
                    Books
                      and Records; Inspection Rights

                  	
                    
                      45

                    

                  
	
                    Section
                      9.09

                  	
                    Compliance
                      with Laws

                  	
                    
                      45

                    

                  
	
                    Section
                      9.10

                  	
                    Environmental
                      Matters

                  	
                    46

                  
	
                    Section
                      9.11

                  	
                    Further
                      Assurances

                  	
                    47

                  
	
                    Section
                      9.12

                  	
                    Reserve
                      Reports

                  	
                    47

                  
	
                    Section
                      9.13

                  	
                    Title
                      Information

                  	
                    48

                  
	
                    Section
                      9.14

                  	
                    Additional
                      Collateral; Additional Guarantors

                  	
                    48

                  
	
                    Section
                      9.15

                  	
                    ERISA
                      Compliance

                  	
                    49

                  
	
                    Section
                      9.16

                  	
                    Swap
                      Agreements

                  	
                    50

                  
	
                    Section
                      9.17

                  	
                    Marketing
                      of Production

                  	
                    
                      50

                    

                  
	
                    Section
                      9.18

                  	
                    Overriding
                      Royalty Interests

                  	
                    
                      50

                    

                  
	
                    Section
                      9.19

                  	
                    Right
                      of First Refusal

                  	
                    51

                  
	
                    Section
                      9.20

                  	
                    Separate
                      Entity

                  	
                    
                      51

                    

                  
	
                    Section
                      9.21

                  	
                    Partner
                      Metrics

                  	
                    
                      51

                    

                  
	 	 
	
                    ARTICLE
                      X NEGATIVE COVENANTS

                  	
                    52

                  
	
                    Section
                      10.01

                  	
                    Financial
                      Covenants

                  	
                    52

                  
	
                    Section
                      10.02

                  	
                    Debt

                  	
                    52

                  
	
                    Section
                      10.03

                  	
                    Liens

                  	
                    53

                  

          

           

          
            
              
              

            

            
              ii

              
                

              

            

            
              
              

            

          

          
            	
                    Section
                      10.04

                  	
                    Redemptions

                  	
                    53

                  
	
                    Section
                      10.05

                  	
                    Investments,
                      Loans and Advances

                  	
                    53

                  
	
                    Section
                      10.06

                  	
                    Nature
                      of Business

                  	
                    54

                  
	
                    Section
                      10.07

                  	
                    Limitation
                      on Leases

                  	
                    
                      54

                    

                  
	
                    Section
                      10.08

                  	
                    Sale
                      and Leasebacks

                  	
                    
                      54

                    

                  
	
                    Section
                      10.09

                  	
                    Proceeds
                      of Notes

                  	
                    
                      54

                    

                  
	
                    Section
                      10.10

                  	
                    ERISA
                      Compliance

                  	
                    55

                  
	
                    Section
                      10.11

                  	
                    Sale
                      or Discount of Receivables

                  	
                    56

                  
	
                    Section
                      10.12

                  	
                    Mergers,
                      Etc.

                  	
                    
                      56

                    

                  
	
                    Section
                      10.13

                  	
                    Sale
                      of Properties

                  	
                    
                      56

                    

                  
	
                    Section
                      10.14

                  	
                    Environmental
                      Matters

                  	
                    
                      56

                    

                  
	
                    Section
                      10.15

                  	
                    Transactions
                      with Affiliates

                  	
                    
                      56

                    

                  
	
                    Section
                      10.16

                  	
                    Capital
                      Expenditures

                  	
                    
                      56

                    

                  
	
                    Section
                      10.17

                  	
                    Material
                      Agreements

                  	
                    57

                  
	
                    Section
                      10.18

                  	
                    Affiliates

                  	
                    
                      57

                    

                  
	
                    Section
                      10.19

                  	
                    Negative
                      Pledge Agreements; Dividend Restrictions

                  	
                    
                      57

                    

                  
	
                    Section
                      10.20

                  	
                    Gas
                      Imbalances, Take-or-Pay or Other Prepayments

                  	
                    
                      57

                    

                  
	
                    Section
                      10.21

                  	
                    Swap
                      Agreements

                  	
                    
                      57

                    

                  
	
                    Section
                      10.22

                  	
                    Certain
                      Activities

                  	
                    58

                  
	
                    Section
                      10.23

                  	
                    Net
                      Sales

                  	
                    
                      58

                    

                  
	
                    Section
                      10.24

                  	
                    G&A
                      Costs

                  	
                    
                      58

                    

                  
	
                    Section
                      10.25

                  	
                    Press
                      Release

                  	
                    
                      58

                    

                  
	 	 
	
                    ARTICLE
                      XI EVENTS OF DEFAULT; REMEDIES

                  	
                    58

                  
	
                    Section
                      11.01

                  	
                    Events
                      of Default

                  	
                    58

                  
	
                    Section
                      11.02

                  	
                    Remedies

                  	
                    60

                  
	
                    Section
                      11.03

                  	
                    Disposition
                      of Proceeds

                  	
                    61

                  
	 	 
	
                    ARTICLE
                      XII THE ADMINISTRATIVE AGENT

                  	
                    61

                  
	
                    Section
                      12.01

                  	
                    Appointment;
                      Powers

                  	
                    61

                  
	
                    Section
                      12.02

                  	
                    Duties
                      and Obligations of Administrative Agent

                  	
                    62

                  
	
                    Section
                      12.03

                  	
                    Action
                      by Administrative Agent

                  	
                    62

                  
	
                    Section
                      12.04

                  	
                    Reliance
                      by Administrative Agent

                  	
                    63

                  
	
                    Section
                      12.05

                  	
                    Subagents

                  	
                    
                      63

                    

                  
	
                    Section
                      12.06

                  	
                    Resignation
                      or Removal of Administrative Agent

                  	
                    
                      63

                    

                  
	
                    Section
                      12.07

                  	
                    Agents
                      as Lenders

                  	
                    64

                  
	
                    Section
                      12.08

                  	
                    No
                      Reliance

                  	
                    
                      64

                    

                  
	
                    Section
                      12.09

                  	
                    Authority
                      of Administrative Agent to Release Collateral and Liens

                  	
                    
                      64

                    

                  
	 	 
	
                    ARTICLE
                      XIII MISCELLANEOUS

                  	
                    65

                  
	
                    Section
                      13.01

                  	
                    Notices

                  	
                    65

                  
	
                    Section
                      13.02

                  	
                    Waivers;
                      Amendments

                  	
                    66

                  
	
                    Section
                      13.03

                  	
                    Expenses,
                      Indemnity; Damage Waiver.

                  	
                    67

                  
	
                    Section
                      13.04

                  	
                    Successors
                      and Assigns

                  	
                    69

                  
	
                    Section
                      13.05

                  	
                    Survival;
                      Revival; Reinstatement

                  	
                    70

                  
	
                    Section
                      13.06

                  	
                    Counterparts;
                      Integration; Effectiveness

                  	
                    70

                  
	
                    Section
                      13.07

                  	
                    Severability

                  	
                    71

                  
	
                    Section
                      13.08

                  	
                    Right
                      of Setoff

                  	
                    
                      71

                    

                  
	
                    Section
                      13.09

                  	
                    GOVERNING
                      LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

                  	
                    
                      71

                    

                  
	
                    Section
                      13.10

                  	
                    Headings

                  	
                    72

                  
	
                    Section
                      13.11

                  	
                    Confidentiality

                  	
                    
                      72

                    

                  

          

           

          
            
              
              

            

            
              iii

              
                

              

            

            
              
              

            

          

          
            	
                    Section
                      13.12

                  	
                    Interest
                      Rate Limitation

                  	
                    
                      72

                    

                  
	
                    Section
                      13.13

                  	
                    EXCULPATION
                      PROVISIONS

                  	
                    73

                  
	
                    Section
                      13.14

                  	
                    Collateral
                      Matters; Swap Agreements

                  	
                    74

                  
	
                    Section
                      13.15

                  	
                    No
                      Third Party Beneficiaries

                  	
                    
                      74

                    

                  
	
                    Section
                      13.16

                  	
                    Securitization

                  	
                    
                      74

                    

                  
	
                    Section
                      13.17

                  	
                    USA
                      Patriot Act Notice

                  	
                    75

                  

          

        

      

    

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

     

    Annexes,
      Exhibits and Schedules

     

    
      
        	
                Annex
                  I

              	
                List
                  of Commitments

              
	
                Exhibit
                  A

              	
                Form
                  of Note

              
	
                Exhibit
                  B-1

              	
                Form
                  of Initial Funding Disbursement Request

              
	
                Exhibit
                  B-2

              	
                Form
                  of Subsequent Commitment Increase Request

              
	
                Exhibit
                  B-3

              	
                Form
                  of Invoice Disbursement Request

              
	
                Exhibit
                  C

              	
                Form
                  of Direction Letter

              
	
                Exhibit
                  D

              	
                Form
                  of Compliance Certificate

              
	
                Exhibit
                  E

              	
                Form
                  of Legal Opinion of Glast
                  Phillips & Murray, special
                  counsel to the Borrower

              
	
                Exhibit
                  F-1

              	
                Security
                  Instruments

              
	
                Exhibit
                  F-2

              	
                Form
                  of Security Agreement

              
	
                Exhibit
                  G

              	
                Form
                  of Assignment and Assumption

              
	
                Exhibit
                  H

              	
                Form
                  of Conveyance of Overriding Royalty Interest 

              
	
                Exhibit
                  I

              	
                Form
                  of Participation Agreement

              
	
                Exhibit
                  J

              	
                Form
                  of Letter-in-Lieu

              
	
                Exhibit
                  K

              	
                Development
                  Plan

              
	
                Exhibit
                  L

              	
                Form
                  of Pledge Agreement

              
	 	 
	
                Schedule
                  1.01

              	
                AFE
                  Requirements

              
	
                Schedule
                  1.02

              	
                Approved
                  Counterparties

              
	
                Schedule
                  8.05

              	
                Litigation

              
	
                Schedule
                  8.06

              	
                Environmental
                  Matters

              
	
                Schedule
                  8.13

              	
                Insurance

              
	
                Schedule
                  8.15

              	
                Subsidiaries
                  and Partnerships

              
	
                Schedule
                  8.17

              	
                Title
                  to Properties

              
	
                Schedule
                  8.19

              	
                Gas
                  Imbalances

              
	
                Schedule
                  8.20

              	
                Marketing
                  Contracts

              
	
                Schedule
                  8.21

              	
                Swap
                  Agreements

              
	
                Schedule
                  8.25

              	
                Material
                  Agreements

              
	
                Schedule
                  8.30

              	
                Past
                  Due Accounts Payable

              
	
                Schedule
                  9.02(e)

              	
                Notice
                  of Certain Events

              
	
                Schedule
                  10.02

              	
                Debt

              
	
                Schedule
                  10.03

              	
                Excepted
                  Liens

              
	
                Schedule
                  10.05

              	
                Investments

              
	
                Schedule
                  10.07

              	
                Leases

              
	
                Schedule
                  10.23

              	
                Net
                  Sales Volumes

              

      

       

    

    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

    

    This
      CREDIT AGREEMENT
      dated as
      of September 2, 2005, is among Crosspoint Energy Holdings, LLC, a limited
      liability company duly formed and existing under the laws of the State of Texas
      (the “Borrower”);
      each
      of the Lenders from time to time party hereto; and D.
      B.
      Zwirn Special Opportunities Fund, L.P., a Delaware limited partnership
(as
      administrative agent for the Lenders (in such capacity, together with its
      successors in such capacity, the “Administrative
      Agent”).

     

    RECITALS

     

    A. The
      Borrower has requested that the Lenders provide certain loans to and extensions
      of credit on behalf of the Borrower.

     

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

     

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

     

    ARTICLE
      I

     

    Definitions
      and Accounting Matters

     

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

     

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

     

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

     

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

     

    “Applicable
      Percentage”
means,
      with respect to any Lender, the percentage set forth on Annex
      I.

     

    “Applicable
      Rate”
means,
      for any day, with respect to any Loan, the Reference Rate plus five and one-half
      percent (5 1⁄2%) per annum.

     

    “Approved
      Counterparty”
means
      (a) any Lenders or any Affiliate of a Lender, (b) any other Person whose long
      term senior unsecured debt rating is A-/A3 by S&P or Moody’s (or their
      equivalent) or higher, or (c) with regard to Swap Agreements in respect of
      commodities, and subject to the conditions set forth therein, any other Person
      listed on Schedule
      1.02.

     

    “Approved
      Petroleum Engineers”
means
      any independent petroleum engineers reasonably acceptable to the Administrative
      Agent.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    “Arranger”
means
      Petrobridge Investment Management LLC, in its capacity as the sole lead arranger
      hereunder.

     

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

     

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

     

    “Borrowing”
means
      Loans made on the same date.

     

    “Business
      Day”
means
      any day that is not a Saturday, Sunday or other day on which commercial banks
      in
      Houston, Texas or New York, New York are authorized or required by law to remain
      closed.

     

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

     

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

     

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

     

    “Casualty
      Event”
means
      any loss, casualty or other insured damage to, or any nationalization, taking
      under power of eminent domain or by condemnation or similar proceeding of any
      Property of the Borrower or any of its Affiliates, in each case having a total
      loss of value to such Property in excess of $50,000.

     

    “Casualty
      Proceeds”
has
      the
      meaning assigned to such term in Section 6.01(b)(iv).

     

    “Casualty
      Proceeds Account”
has
      the
      meaning assigned to such term in Section 6.03.

     

    “Change
      in Control”
means
      the occurrence of any of the following events (a) the acquisition of ownership,
      directly or indirectly, beneficially or of record, by other than Crosspoint
      Energy, LLC of Equity Interests of Borrower, (b) either Daniel F. Collins and
      Jeffrey A. Krakos fails
      to
      own a minimum of 10% of the outstanding Equity Interests of the Parent, (c)
      the
      management of the Borrower is, in the reasonable opinion of the Lenders,
      substantially diminished as a result of the departure for any reason of the
      President or any Vice President of Borrower, or (d) Daniel F. Collins and
      Jeffrey A. Krakos do
      not
      participate in the management and direction of Borrower and Parent.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

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

     

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

     

    “Collateral”
means
      any and all (a) Properties of the Borrower and its Affiliates of whatsoever
      kind
      or description (whether now owned or hereafter acquired and including, without
      limitation, all of their Oil and Gas Properties), (b) of the issued and
      outstanding Equity Interests of the Borrower and (c) other Properties of
      whatsoever kind or description, in each case, in which an interest is granted
      or
      pledged under a Security Instrument.

     

    “Commitment”
means,
      with respect to each Lender, the commitment of such Lender to make Loans
      hereunder, expressed as an amount representing the maximum aggregate amount
      of
      such Lender’s Loans hereunder. The amount representing each Lender’s Commitment
      is set forth on Annex
      I.
      Initially, the aggregate amount of the Commitments of the Lenders shall be
      equal
      to the Initial Commitment (Two Million Five Hundred Ninety-Seven Thousand One
      Hundred Thirty-Five Dollars $2,597,135); provided,
      however,
      that
      the Lenders may in their sole discretion, but shall be under no obligation
      whatsoever to do so, make Loans hereunder above the Initial Commitment up to
      an
      aggregate amount equal to the sum of the Lenders’ Commitments as set forth on
Annex I.

     

    “Commitment
      Fee”
has
      the
      meaning assigned such term in Section
      2.04(a).

     

    “Commitment
      Termination Date”
has
      the
      meaning given such term in Section
      2.01(a).

     

    “Consolidated
      Interest Expense”
means,
      for any period, total interest expense and prepayment charges (including that
      which is capitalized and that which is attributable to capital leases, in
      accordance with GAAP) of the Borrower and its Consolidated Affiliates, as
      appropriate, on a consolidated basis with respect to all outstanding
      indebtedness of the Borrower and its Consolidated Affiliates, including, without
      limitation, all commissions, discounts and other fees and charges owed with
      respect to any letters of credit, amortization of debt, discount, expense,
      other
      deferred financing costs.

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Consolidated
      Rents”
means,
      for any period, the sum of all rental and other obligations required to be
      paid
      during such period by the Borrower, Parent or any Affiliate, as lessee under
      all
      leases of real or personal property (other than capital leases), excluding
      any
      amount required to be paid by the lessee (whether or not therein designated
      as
      rental or additional rental) on account of maintenance and repairs, insurance,
      taxes, assessments, water rates and similar charges; provided
      that, if
      at the date of determination, any such rental or other obligations (or portion
      thereof) are contingent or not otherwise definitely determinable by the terms
      of
      the related lease, the amount of such obligations (or such portion thereof)
      (a)
      shall be assumed to be equal to the amount of such obligations for the period
      of
      twelve consecutive calendar months immediately preceding the date of
      determination or (b) if the related lease was not in effect during such
      preceding twelve-month period, shall be the amount estimated by the Borrower
      on
      a reasonable basis and in good faith.

     

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

     

    “Control”
means
      the possession, directly or indirectly, of the power to direct or cause the
      direction of the management or policies of a Person, whether through the ability
      to exercise voting power, by contract or otherwise. For the purposes of this
      definition, and without limiting the generality of the foregoing, any Person
      that owns directly or indirectly 15% or more of the Equity Interests having
      ordinary voting power for the election of the directors or other governing
      body
      of a Person (other than as a limited partner of such other Person) will be
      deemed to “control” such other Person. “Controlling”
and
      “Controlled”
have
      meanings correlative thereto.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Credit
      Agreement Termination Date”
means
      the date on which the Commitments of the Lenders have terminated and all
      principal, interest and all other Indebtedness have been paid in full, and
      all
      amounts due to any Lender or any of their Affiliates under any Swap Agreements
      have been paid in full.

     

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

     

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

     

    “Development
      Plan”
shall
      mean the Borrower’s Plan of Development for the Oil and Gas Properties and the
      related Hydrocarbon Interests attached as Exhibit
      K,
      as
      approved by Administrative Agent, as the same may be amended from time to time
      with the approval of the Administrative Agent.

     

    “Development
      Project”
means
      each development project for the Oil and Gas Properties to be developed in
      accordance with the Development Plan.

     

    “Direction
      Letters”
means
      letters substantially in the form of Exhibit
      C.

     

    “Disbursement
      Date”
has
      the
      meaning assigned to such term in Section
      3.01(a).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    “Disqualified
      Capital Stock”
means
      any Equity Interest that, by its terms (or by the terms of any security into
      which it is convertible or for which it is exchangeable) or upon the happening
      of any event, matures or is mandatorily redeemable for any consideration other
      than other Equity Interests (which would not constitute Disqualified Capital
      Stock), pursuant to a sinking fund obligation or otherwise, or is convertible
      or
      exchangeable for Debt or redeemable for any consideration other than other
      Equity Interests (which would not constitute Disqualified Capital Stock) at
      the
      option of the holder thereof, in whole or in part, on or prior to the date
      that
      is one year after the earlier of (a) the Maturity Date and (b) the date on
      which
      there are no Loans or other obligations hereunder outstanding and all of the
      Commitments are terminated.

     

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

     

    “EBITDA”
means,
      for any period, the sum of Consolidated Net Income for such period plus the
      following expenses or charges to the extent deducted from Consolidated Net
      Income in such period: interest, income taxes, depreciation, depletion,
      amortization and other similar noncash charges, minus all noncash items added
      to
      Consolidated Net Income.

     

    “Effective
      Date”
means
      the date on which the conditions specified in Section
      7.01
      are
      satisfied (or waived in accordance with Section
      13.02).

     

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

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

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

     

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

     

    “ERISA
      Event”
means
      (a) a “Reportable Event” described in section 4043 of ERISA and the regulations
      issued thereunder, (b) the withdrawal of the Borrower, an Affiliate or any
      ERISA
      Affiliate from a Plan during a plan year in which it was a “substantial
      employer” as defined in section 4001(a)(2) of ERISA, (c) the filing of a notice
      of intent to terminate a Plan or the treatment of a Plan amendment as a
      termination under section 4041 of ERISA, (d) the institution of proceedings
      to
      terminate a Plan by the PBGC, (e) receipt of a notice of withdrawal liability
      pursuant to Section 4202 of ERISA or (f) any other event or condition which
      might constitute grounds under section 4042 of ERISA for the termination of,
      or
      the appointment of a trustee to administer, any Plan.

     

    “Event
      of Default”
has
      the
      meaning assigned such term in Section
      11.01.

     

    “Excepted
      Liens”
means:
      (a) Liens for Taxes, assessments or other governmental charges or levies that
      are not yet due or that are being contested in good faith by appropriate action
      and for which adequate reserves have been maintained in accordance with GAAP;
      (b) Liens in connection with workers’ compensation, unemployment insurance or
      other social security, old age pension or public liability obligations that
      are
      not yet due or that are being contested in good faith by appropriate action
      and
      for which adequate reserves have been maintained in accordance with GAAP; (c)
      statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s,
      repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or
      other like Liens arising by operation of law in the ordinary course of business
      or incident to the exploration, development, operation and maintenance of Oil
      and Gas Properties each of which is in respect of obligations that have not
      been
      outstanding for more than 60 days and provided,
      if such
      liens are being disputed, are being contested in good faith by appropriate
      action and for which adequate reserves have been maintained in accordance with
      GAAP; (d) contractual Liens which arise in the ordinary course of business
      under
      operating agreements, joint venture agreements, oil and gas partnership
      agreements, oil and gas leases, farm-out agreements, division orders, contracts
      for the sale, transportation or exchange of oil and natural gas, unitization
      and
      pooling declarations and agreements, area of mutual interest agreements,
      overriding royalty agreements, marketing agreements, processing agreements,
      net
      profits agreements, development agreements, gas balancing or deferred production
      agreements, injection, repressuring and recycling agreements, salt water or
      other disposal agreements, seismic or other geophysical permits or agreements,
      or other agreements that are usual and customary in the oil and gas business
      and
      are for claims that have not been outstanding for more than 60 days and
provided,
      if such
      liens are being disputed, are being contested in good faith by appropriate
      action and for which adequate reserves have been maintained in accordance with
      GAAP, provided
      that any
      such Lien referred to in this clause does not materially impair the use of
      the
      Property covered by such Lien for the purposes for which such Property is held
      by the Borrower or any Affiliate or materially impair the value of such Property
      subject thereto; (e) easements, restrictions, servitudes, permits, conditions,
      covenants, exceptions or reservations in any Property of the Borrower or any
      Affiliate for the purpose of roads, pipelines, transmission lines,
      transportation lines, distribution lines for the removal of gas, oil, coal
      or
      other minerals or timber, and other like purposes, or for the joint or common
      use of real estate, rights of way, facilities and equipment, which in the
      aggregate do not materially impair the use of such Property for the purposes
      of
      which such Property is held by the Borrower or any Subsidiary or materially
      impair the value of such Property subject thereto; (f) Liens on cash or
      securities pledged to secure performance of tenders, surety and appeal bonds,
      government contracts, performance and return of money bonds, bids, trade
      contracts, leases, statutory obligations, regulatory obligations and other
      obligations of a like nature incurred in the ordinary course of business; and
      (g) rights of set off or banker’s liens created by law in favor of commercial
      banks with respect to any bank account of Borrower; provided,
      further
      that
      Liens described in clauses (a) through (d) shall remain “Excepted Liens” only
      for so long as no action to enforce such Lien has been commenced and no
      intention to subordinate the first priority Lien granted in favor of the
      Administrative Agent and the Lender is to be hereby implied or expressed by
      the
      permitted existence of such Excepted Liens.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    “Excluded
      Taxes”
means,
      with respect to the Administrative Agent, any Lender, or any other recipient
      of
      any payment to be made by or on account of any obligation of the Borrower or
      any
      Guarantor hereunder or under any other Loan Document, (a) income or franchise
      taxes imposed on (or measured by) its net income by the United States of America
      or such other jurisdiction under the laws of which such recipient is organized
      or in which its principal office is located or, in the case of any Lender,
      in
      which its applicable lending office is located, and (b) any branch profits
      taxes
      imposed by the United States of America or any similar tax imposed by any other
      jurisdiction in which the Borrower or any Guarantor is located.

     

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    “GAAP”
means
      generally accepted accounting principles in the United States of America as
      in
      effect from time to time subject to the terms and conditions set forth in
Section
      1.04.

     

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

     

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

     

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

     

    “Guarantor”
means
      any Parent or Affiliate of the Borrower that guarantees the Indebtedness
      pursuant to Section
      9.14(b)
      and any
      other Person that guarantees the Indebtedness pursuant to the Security
      Instruments. 

     

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

     

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

     

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

     

    “Indebtedness”
means
      any and all amounts owing or to be owing by the Borrower, Parent any Affiliate
      or any Guarantor: (a) to the Administrative Agent or any Lender under any Loan
      Document; (b) to any Lender or any Affiliate of a Lender under any Swap
      Agreement between the Borrower or any Subsidiary and such Lender or Affiliate
      of
      a Lender while such Person (or in the case of its Affiliate, the Person
      affiliated therewith) is a Lender hereunder and (c) all renewals, extensions
      and/or rearrangements of any of the above.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    “Indemnified
      Taxes”
means
      Taxes other than Excluded Taxes.

     

    “Indemnitee”
has
      the
      meaning assigned such term in Section
      13.03(b).

     

    “Information”
has
      the
      meaning assigned to such term in Section
      13.11.

     

    “Initial
      Commitment”
has
      the
      meaning assigned such term in Section
      2.01.

     

    “Initial
      Funding”
has
      the
      meaning assigned such term in Section
      2.02(a).

     

    “Initial
      Funding Disbursement Request”
means
      a
      written request by the Borrower to the Lenders for the Initial Funding in the
      form of Exhibit
      B-1.

     

    “Initial
      Reserve Report”
means
      these certain reserve reports of Netherland & Sewell dated as of May 1, 2005
      with respect to certain Oil and Gas Properties of the Borrower and its
      Affiliates (including those being acquired pursuant to the Purchase Agreements)
      as of May 1, 2005.

     

    “Insolvent”
means:
      (a) with reference to a Person other than a partnership, that (i) the sum of
      such Person’s debts is greater than all of its properties, at a fair valuation,
      exclusive of any properties transferred, concealed, or removed with intent
      to
      hinder, delay, or defraud creditors or (ii) such Person is generally not able
      to
      pay its debts as they become due, and (b) with reference to a Person that is
      a
      partnership, that (i) such Person’s financial condition is such that the sum of
      its debts is greater than the aggregate of, at a fair valuation, (A) all of
      such
      partnership’s properties exclusive of properties transferred, concealed or
      removed with intent to hinder, delay or defraud creditors of the partnership,
      and (B) the sum of the excess of the value of each general partner’s
      non-partnership properties, exclusive of properties transferred, concealed
      or
      removed with intent to hinder, delay or defraud creditors, over such general
      partner’s non-partnership debts or (ii) such Person is generally not able to pay
      its debts as they become due.

     

    “Investment”
means,
      for any Person: (a) the acquisition (whether for cash, Property, services or
      securities or otherwise) of Equity Interests of any other Person, the
      contribution of capital to any other Person, or any agreement to make any such
      acquisition (including, without limitation, any “short sale” or any sale of any
      securities at a time when such securities are not owned by the Person entering
      into such short sale) or capital contribution; (b) the making of any deposit
      with (other than deposits in accounts of Borrower at commercial banks), or
      advance, loan or other extension of credit to, any other Person (including
      the
      purchase of Property from another Person subject to an understanding or
      agreement, contingent or otherwise, to resell such Property to such Person,
      but
      excluding any such advance, loan or extension of credit having a term not
      exceeding ninety (90) days representing the purchase price of inventory or
      supplies sold by such Person in the ordinary course of business) or (c) the
      entering into of any guarantee of, or other contingent obligation (including
      the
      deposit of any Equity Interests to be sold) with respect to, Debt or other
      liability of any other Person and (without duplication) any amount committed
      to
      be advanced, lent or extended to such Person. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    “Invoice
      Disbursement Request”
means
      a
      written request by the Borrower for a Subsequent Funding relating to a
      Subsequent Commitment Increase Request that has been previously approved by
      the
      Lenders, which Invoice Disbursement Request (a) shall set forth the amount
      of
      the Subsequent Funding then requested to pay costs incurred in connection with
      the Development Project covered by the related Subsequent Commitment Increase
      Request or the acquisition of additional Oil and Gas Properties, (b) is
      accompanied by supporting invoices and other documentation required by the
      Lenders, including, in connection with the acquisition of additional Oil and
      Gas
      Properties, Security Instruments and an ORRI Conveyance covering the additional
      Oil and Gas Properties and opinions of the Borrower’s counsel, and (c) is
      substantially in the form of Exhibit
      B-3.

     

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

     

    “Letters-in-Lieu”
means
      letters-in-lieu substantially in the form of Exhibit
      J.

     

    “Liabilities”
has
      the
      meaning assigned such term in Section
      13.16.

     

    “Lien”
means
      any interest in Property securing an obligation owed to, or a claim by, a Person
      other than the owner of the Property, whether such interest is based on the
      common law, statute or contract, and whether such obligation or claim is fixed
      or contingent, and including but not limited to (a) the lien or security
      interest arising from a mortgage, encumbrance, pledge, security agreement,
      conditional sale or trust receipt or a lease, consignment or bailment for
      security purposes or (b) royalties, production payments and the like payable
      out
      of Oil and Gas Properties. The term “Lien”
shall
      include easements, restrictions, servitudes, permits, conditions, covenants,
      encroachments, exceptions, title exceptions or reservations. For the purposes
      of
      this Agreement, the Borrower and its Affiliates shall be deemed to be the owner
      of any Property which it has acquired or holds subject to a conditional sale
      agreement, or leases under a financing lease or other arrangement pursuant
      to
      which title to the Property has been retained by or vested in some other Person
      in a transaction intended to create a financing.

     

    “Loan
      Documents”
means
      this Agreement, the Notes, the Security Instruments, the ORRI Conveyances and
      the Participation Agreement.

     

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

     

    “Lockbox
      Account”
has
      the
      meaning assigned such term in Section
      6.01(a).

     

    “Lockbox
      Bank”
has
      the
      meaning assigned such term in Section
      6.01(a).

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    “Material
      Agreements”
has
      the
      meaning assigned such term in Section
      8.25.

     

    “Material
      Indebtedness”
means
      Debt (other than the Loans) in excess of $50,000, or obligations in respect
      of
      one or more Swap Agreements, of any one or more of the Borrower and its
      Affiliates.

     

    “Maturity
      Date”
means
      the date that is three years after the Effective Date.

     

    “Monthly
      Date”
means
      the last day of each calendar month, but if Administrative Agent determines
      with
      respect to any month that not all Cash Receipts expected for such month have
      yet
      been deposited in the Lockbox Account, it may at its election (and without
      obligation to provide any notice to the Borrower or any other Person) defer
      the
      Monthly Date for up to four additional Business Days.

     

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

     

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

     

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

     

    “Net
      Present Value”
means,
      in respect of either of the Proved Developed Producing Reserves and the Total
      Proved Reserves, respectively, of the Oil and Gas Properties, the present value
      of future cash flows (discounted at 10% per annum) calculated by the
      Administrative Agent in its sole and reasonable judgment (including using a
      price curve determined by Administrative Agent) after having reviewed the
      information from the most recent Reserve Report delivered by the Borrower
      pursuant to Section
      7.01(p)
      or
Section
      9.12
      and
      taking into account all other factors which the Administrative Agent deems
      material.

     

    “Notes”
means
      the promissory notes of the Borrower described in Section
      2.05
      and
      being substantially in the form of Exhibit
      A,
      together with all amendments, modifications, replacements, extensions and
      rearrangements thereof.

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    “Operating
      Account”
has
      the
      meaning assigned such term in Section 6.01(d).

     

    “Operating
      Costs”
means
      all costs (net to the Borrower and its Affiliates) associated with the direct
      operation of the Borrower’s and its Affiliates’ Oil and Gas
      Properties.

     

    “ORRI
      Conveyances”
means
      any Conveyance of Overriding Royalty Interest in the form attached hereto as
      Exhibit H
      from the
      Borrower to Lenders.

     

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

     

    “Parent”
means
      CrossPoint Energy, LLC, a Texas limited liability company and sole member of
      Borrower.

     

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

     

    “Participation
      Agreement”
means
      that certain Participation Agreement issued by Borrower to the Lenders at
      Closing in substantially the form attached hereto as Exhibit I,
      as the
      same may be amended, modified or supplemented from time to time. 

     

    “Partnermetrics”
means
      Partner Metrics, LLC, an Affiliate of The Strickland Group.

     

    “Patriot
      Act”
has
      the
      meaning assigned such term in Section
      13.17.

     

    “PBGC”
means
      the Pension Benefit Guaranty Corporation, or any successor thereto.

     

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    “Pledge
      Agreement”
means
      an agreement among each holder of any Equity Interest in the Borrower, on the
      one hand, and the Administrative Agent on the other in substantially the form
      of
Exhibit
      L,
      as the
      same may be amended, modified or supplemented from time to time.

     

    “Post
      Default Rate”
shall
      mean, in respect of the principal of any Loan or any other amount payable by
      the
      Borrower under this Agreement or any other Loan Document, a rate per annum
      during the period commencing on the date of occurrence of an Event of Default
      until such amount is paid in full or all Events of Default are cured or waived
      equal to the Applicable Rate plus two percent 2% per annum, but in no event
      to
      exceed the Highest Lawful Rate.

     

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

     

    “Proved
      Developed Non-Producing Reserves”
has
      the
      meaning assigned such term in the SPE Definitions.

     

    “Proved
      Developed Producing Reserves”
has
      the
      meaning assigned such term in the SPE Definitions.

     

    “Proved
      Undeveloped Reserves”
has
      the
      meaning assigned such term in the SPE Definitions.

     

    “Quarterly
      Taxes”
means
      the amount that holders or Equity Interests of the Borrower would be required
      to
      pay with respect to the income of the Parent for the respective fiscal quarter
      provided
      such
      amount shall not exceed the Consolidated Net Income of Parent for the applicable
      fiscal quarter multiplied by the highest marginal federal tax rate for an
      individual at such time.

     

    “Rating
      Agencies”
has
      the
      meaning assigned such term in Section
      13.16.

     

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

     

    “Reference
      Rate”
means
      the rate of interest per annum publicly announced from time to time in the
      Wall
      Street Journal as the prime rate; each change in the Wall Street Journal’s
      quotation of the Prime Rate shall be effective from and including the date
      such
      change is publicly announced as being effective. In the event that the Wall
      Street Journal is no longer published or does not have a quotation for the
      Prime
      Rate, Lenders will utilize the Prime rate of Interest quoted by JPMorgan Chase
      Bank or such other financial institution or publication that is nationally
      recognized.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    “Reserve
      Report”
means
      the Initial Reserve Report and each other report, in form and substance
      satisfactory to the Lenders in their sole discretion (including, without
      limitation, the use of satisfactory methodologies and risk analyses), setting
      forth, the updated estimates of Proved Developed Producing Reserves, Proved
      Developed Non-Producing Reserves, and Proved Undeveloped Reserves and projected
      production profiles and overall economics of the Oil and Gas Properties,
      together with a projection of the rate of production and future cash flows
      as of
      such date, based on the following pricing assumptions:

     

    (a) oil
      and
      gas prices (as adjusted by Administrative Agent for btu content and quality)
      will be determined by Administrative Agent based on Administrative Agent’s then
      current forward product pricing curve, which prices will be adjusted to reflect
      location and quality differentials and hedging arrangements then in
      place;

     

    (b) cash
      flow
      will be determined based on the Borrower’s net production (projected production
      profile less royalty volumes adjusted for working interest ownership) multiplied
      by above prices, less (x) the Operating Costs and production and severance
      taxes
      and (y) capital expenditures including any abandonment costs; and

     

    (c) Operating
      Costs and production and severance taxes shall be based on actual
      costs.

     

    “Residual
      Balance”
means
      the positive balance, if any, in the Lockbox Account on the Disbursement Date
      after the payment of the amounts described in Section
      6.01(b)(i)
      through
Section
      6.01(b)(iv).
      

     

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

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    “Securitization”
has
      the
      meaning assigned such term in Section
      13.16.

     

    “Securitization
      Parties”
has
      the
      meaning assigned such term in Section
      13.16.

     

    “Security
      Agreement”
means
      an agreement between the Borrower and the Administrative Agent in substantially
      the form of Exhibit
      F-2,
      as the
      same may be amended, modified or supplemented from time to time.

     

    “Security
      Instruments”
means
      the Security Agreement, the Pledge Agreement, mortgages, deeds of trust and
      other agreements, instruments or certificates described or referred to in
Exhibit
      F-1,
      and any
      and all other agreements, guarantees, instruments or certificates now or
      hereafter executed and delivered by the Borrower or any other Person (other
      than
      Swap Agreements with the Lenders or any Affiliate of a Lender or participation
      or similar agreements between any Lender and any other Lender or creditor with
      respect to any Indebtedness pursuant to this Agreement) in connection with,
      or
      as security for the payment or performance of the Indebtedness, the Notes and
      this Agreement, as such agreements may be amended, modified, supplemented or
      restated from time to time.

     

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

     

    “SPE
      Definitions”
means,
      with respect to any term, the definition thereof adopted by the Board of
      Directors, Society for Petroleum Engineers (SPE) Inc., March 1997.

     

    “Subsequent
      Commitment Increases”
has
      the
      meaning assigned such term in Section
      2.01(a).

     

    “Subsequent
      Commitment Increase Request”
means
      a
      written request by the Borrower to the Lenders relating to Subsequent Commitment
      Increase with respect to a specific Development Project or the acquisition
      of
      additional Oil and Gas Properties. Such request shall be in the form of
Exhibit
      B-2
      and
      shall be delivered by the Borrower accompanied by supporting data relating
      thereto, which data shall include (a) the identification of the items or
      activities on the Development Plan or the terms and conditions of the
      acquisition (in each case) for which funds are being sought, (b) in the
      event of a Development Project, an AFE reflecting the total estimated cost
      of
      such items or activities, the information described in Schedule
      1.01,
      or in
      the event of an acquisition of additional Oil and Gas Properties, the purchase
      price thereof and (c) such additional information as the Lenders shall
      reasonably request for the purpose of evaluating any Subsequent Commitment
      Increase relating thereto.

     

    “Subsequent
      Funding Date”
has
      the
      meaning assigned such term in Section
      2.02(b).

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    “Total
      Debt”
means,
      at any date, all Debt of the Borrower and its Consolidated Affiliates on a
      consolidated basis.

     

    “Total
      Proved Reserves”
shall
      be as defined in the SPE Definitions.

     

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

     

    “Wholly-Owned
      Subsidiary”
means
      any Subsidiary of which all of the outstanding Equity Interests (other than
      any
      directors’ qualifying shares mandated by applicable law), on a fully-diluted
      basis, are owned by the Borrower or one or more of the Wholly-Owned Affiliates
      or by the Borrower and one or more of the Wholly-Owned
      Subsidiaries.

     

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

     

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

     

    ARTICLE
      II

    Commitment

     

    Section
      2.01 Loan;
      Funding of Development Projects,
      Loans.

     

    (a) Loans.
      Subject
      to the terms and conditions of this Agreement, each Lender severally agrees
      to
      make Loans to the Borrower in an aggregate principal amount not to exceed its
      Applicable Percentage of an initial commitment of the Lenders of Two Million
      Five Hundred Ninety-Seven Thousand One Hundred Thirty-Five Dollars ($2,597,135)
      (the “Initial
      Commitment”),
      with
      subsequent Loans in an aggregate principal amount not to exceed such Lender’s
      Applicable Percentage of up to an additional Thirty-Seven Million Four Hundred
      Two Thousand Eight Hundred Sixty-Five Dollars ($37,402,865), in the manner
      and
      for the purposes provided in Section
      2.01(b),
      Section
      2.02(b)
      and
Section
      2.03(b)
      (once
      approved, the “Subsequent
      Commitment Increases”);
      provided,
      however,
      that
      the aggregate amount of all Loans made hereunder shall not exceed Forty Million
      Dollars ($40,000,000). The Initial Funding shall be utilized only for the
      purposes described in Section
      2.03(a).
      Any
      amount of the Commitments which has not been borrowed by the Borrower prior
      to
      February 1, 2008 (the “Commitment
      Termination Date”)
      shall
      not be available to the Borrower for Loans from and after such Commitment
      Termination Date. 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (b) Subsequent
      Commitment Increases.
      Each
      Subsequent Commitment Increase is intended to be used to fund all or a portion
      of the Borrower’s acquisition of Additional Oil and Gas Properties from third
      parties, additional development of the Borrower’s Oil and Gas Properties in
      accordance with the Development Plan, future legal costs in connection with
      this
      Agreement, payment of the Commitment Fee and as is otherwise set forth in
Section
      2.03(b)
      and must
      comply with the conditions precedent set forth in Section 7.02 and Section
      7.03.
      The
      Lenders shall not be obligated to advance any funds in connection with a
      Subsequent Commitment Increase unless such conditions precedent with respect
      thereto have been satisfied to the Lenders’ satisfaction. Upon satisfaction of
      the conditions to a Subsequent Commitment Increase, such funding shall occur
      in
      accordance with Section
      2.02
      and
Section
      2.03. 

     

    Section
      2.02 Borrowings.
      Subject
      to the satisfaction of all conditions precedent by the date of such
      funding:

     

    (a) Initial
      Funding.
      On the
      Effective Date, each Lender shall severally make a Loan to the Borrower in
      an
      amount equal to such Lender’s Applicable Percentage of the first Eight Hundred
      Three Thousand Two Hundred Seventy Dollars ($803,270) of the Initial Commitment
      (the “Initial
      Funding”)
      as set
      forth in the Initial Funding Disbursement Request delivered to such Lender
      by
      11:00 a.m. at least five Business Days prior to the Effective Date and approved
      by the Lenders.
      The
      remaining One Million Seven Hundred Ninety-Three Thousand Eight Hundred
      Sixty-Five Dollars ($1,793,865) of the Initial Commitment will be funded in
      accordance with Section
      2.02(b).

     

    (b) Subsequent
      Funding.
      On each
      Subsequent Funding Date after the Effective Date, each Lender shall severally
      make a Loan to the Borrower in an aggregate principal amount equal to its
      Applicable Percentage of the amount set forth in an approved Invoice
      Disbursement Request relating to an approved Subsequent Funding Request, which
      amount shall not exceed either (i) the then unutilized amount of such Lender’s
      Commitment or (ii) with respect to any Subsequent Funding for any
      Development Project, when taken together with the previous Subsequent Fundings
      made by the Lenders with respect to an approved Subsequent Commitment Increase
      Request covering such Development Project, 110% of
      the
      amount set forth in the authority for expenditure relating to such Subsequent
      Commitment Increase Request. A “Subsequent
      Funding Date”
shall
      mean any Business Day prior to the Commitment Termination Date that is
      designated as the funding date in an Invoice Disbursement Request, which date
      must be at least five Business Days prior to the date upon which the Subsequent
      Funding under such Invoice Disbursement Request is requested to occur. Prior
      to
      making Loans with respect to development activities on the Borrower’s Oil and
      Gas Properties as described in any Development Plan or any acquisition of
      additional Oil and Gas Properties, the Borrower will be required to submit
      an
      Invoice Disbursement Request with respect to such advances. The Lenders shall
      have no further obligation to fund any Loans after the Commitment Termination
      Date.

     

    
      
        
        

      

      
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    (c) Advances.
      Not
      later than 1:00 p.m. New York, New York time on the date specified for each
      Borrowing hereunder, each Lender shall make available the amount of the Loan
      to
      be made by such Lender on such date in immediately available funds, for the
      account of the Borrower. The Borrowing shall, subject to the terms and
      conditions of this Agreement, be (i)
      made
      available to the Borrower by transferring the same, in immediately available
      funds, to the Borrower’s Operating Account or (ii)
      distributed directly to third parties pursuant Section
      2.03(d).

     

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

     

    (e) Minimum
      Amounts.
      All
      Borrowings made pursuant to the notices described in Section
      2.02(b)
      shall be
      in amounts of at least $100,000 or the remaining balance of the Commitment,
      if
      less.

     

    (f) Monthly
      Limit.
      There
      shall not be more than one Subsequent Commitment Increase within any continuous
      30 day period.

     

    Section
      2.03 Use
      of
      Proceeds.
      The
      proceeds of the Loans may be used only for the following purposes:

     

    (a) Initial
      Funding.
      The
      proceeds of the Initial Funding may be used only to:

     

    (i) pay
      an
      amount up to $38,380 related to the commitment fee and other fees under this
      Agreement; and

     

    (ii) pay
      transaction costs of up to $68,000 with respect to the closing of the
      transaction contemplated by this Agreement (including Arranger’s and the
      Lender’s transaction costs as set forth in the Initial Funding Disbursement
      Request approved by the Lenders;

     

    (iii) fund
      Development Projects, but only for the amounts and purposes set forth in the
      Development Plan as approved by the Administrative Agent.

     

    
      
        
        

      

      
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    (b) Subsequent
      Commitment Increases.
      The
      proceeds of any Subsequent Funding may be used only to:

     

    (i) fund
      Development Projects, but only for the amounts and purposes set forth in the
      applicable Subsequent Commitment Increase Request and each Invoice Disbursement
      Request relating thereto for such Development Project;

     

    (ii) pay
      any
      amounts due under Section
      2.04;

     

    (iii) pay
      transaction costs not paid at the Effective Date and legal costs incurred by
      any
      Lender and/or Administrative Agent in connection with the administration of
      this
      Agreement; and

     

    (iv) fund
      the
      acquisition of additional Oil and Gas Properties, in the amounts and for the
      purposes set forth in the applicable Subsequent Commitment Increase Request
      and
      each Invoice Disbursement Request relating thereto for such
      acquisition.

     

    (c) Initial
      Commitment.
      Any
      amounts that have been committed as part of the Initial Commitment but were
      not
      funded as part of the Initial Funding shall only be used to fund Development
      Projects.

     

    (d) Direct
      Funding.
      If and
      Event of Default has occurred and is continuing, the Lenders may, in their
      sole
      discretion, disburse any portion of any advance directly to the Person or
      Persons to whom such proceeds are to be paid, and impose such conditions as
      they
      deem appropriate to insure that such funds are timely and properly paid to
      such
      Persons.

     

    Section
      2.04 Fees.
      

     

    (a) Commitment
      Fee.
      The
      Borrower shall pay to Administrative Agent a fee equal to 1.5% of all amounts
      committed to be loaned to the Borrower hereunder, as follows: (i) in
      connection with the Initial Funding, Borrower will pay $38,380 with respect
      to
      the amounts committed under the Initial Commitment, and (ii) the Borrower
      will pay on the date that any Subsequent Commitment Increase Request has been
      approved by each of the Lenders a fee equal to 1.5% of the amounts committed
      that are approved by the Lenders under the then subject Subsequent Commitment
      Increase in excess of the Initial Commitment and such other previously committed
      funding to the extent that such fee has not been paid previously (“Commitment
      Fee”). 

     

    (b) Administrative
      Fee.
      The
      Borrower shall pay to the Administrative Agent a semi-annual Administrative
      fee
      of $15,000 on each February 15 and August 15 of each year that this Agreement
      is
      in effect in arrears and on the Credit Agreement Termination Date.

     

    Section
      2.05 Notes.
      The
      Loans made by each Lender shall be evidenced by a single promissory note of
      the
      Borrower in substantially the form of Exhibit
      A,
      dated,
      in the case of (a)
      any
      Lender party hereto as of the date of this Agreement, as of the date of this
      Agreement or (b)
      any
      Lender that becomes a party hereto pursuant to an Assignment and Assumption,
      as
      of the effective date of the Assignment and Assumption, payable to the order
      of
      such Lender in a principal amount equal to its Commitment as in effect on such
      date, and otherwise duly completed. The date, amount and interest rate of each
      Loan made by each Lender, and all payments made on account of the principal
      thereof, shall be recorded by such Lender on its books for its Note, and, prior
      to any transfer, may be endorsed by such Lender on a schedule attached to such
      Note or any continuation thereof or on any separate record maintained by such
      Lender. Failure to make any such notation or to attach a schedule shall not
      affect any Lender’s or the Borrower’s rights or obligations in respect of such
      Loans or affect the validity of such transfer by any Lender of its
      Note.
      In the
      event that any Lender’s Loan increases or decreases for any reason (whether
      pursuant to Section
      13.04(b)
      or
      otherwise), upon such Lender’s request, the Borrower shall deliver or cause to
      be delivered on the effective date of such increase or decrease, a new Note
      payable to the order of such Lender in a principal amount equal to its Loan
      after giving effect to such increase or decrease, and otherwise duly
      completed.

     

    
      
        
        

      

      
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    ARTICLE
      III

    Payments
      of Principal and Interest

     

    Section
      3.01 Repayment
      of Loans.

     

    (a) On
      each
      Monthly Date after the Effective Date thereafter (each such date being a
“Disbursement
      Date”),
      the
      Borrower shall repay principal (through Administrative Agent disbursing such
      funds from the Lockbox Account) by an amount equal to ninety-five percent (95%)
      of the difference between (i) the Residual Balance in the Lockbox Account as
      of
      each Disbursement Date less (ii) interest, fees, taxes, development costs and
      General and Administrative Costs paid pursuant to Section
      6.01(b)(v)-(x).
      Notwithstanding the preceding, Borrower may, at its election, reduce the amount
      of principal that it is required to pay to the Lenders under this Section
      3.01(a)
      by up to
      50% (subject to a maximum of 100,000 in any given month) in order to pay General
      and Administrative Costs actually incurred by the Borrower and its Affiliates
      in
      the immediately preceding month. For the avoidance of doubt, such principal
      that
      Borrower elects not to repay in any month pursuant to the immediately preceding
      sentence shall remain outstanding under this Agreement. Notwithstanding the
      preceding, Borrower may, at its election, reduce the amount of principal that
      it
      is required to pay to the Lenders under this Section
      3.01(a)
      by up to
      50% (subject to a maximum of $100,000 in any given month) in order to pay
      General and Administrative Costs actually incurred by the Borrower and its
      Affiliates in the immediately preceding month. For the avoidance of doubt,
      such
      principal that Borrower elects not to repay in any month pursuant to the
      immediately preceding sentence shall remain outstanding under this
      Agreement.

     

    (b) Notwithstanding
      the provisions of Section
      3.01(a)
      above,
      upon the occurrence and during the continuation of any Event of Default, on
      each
      Monthly Date during such period (each such date being a “Disbursement
      Date”),
      the
      Borrower shall repay principal (through Administrative Agent disbursing such
      funds from the Lockbox Account) by an amount equal to one hundred percent (100%)
      of the difference between (i) the Residual Balance in the Lockbox Account as
      of
      each Disbursement Date less (ii) interest, fees, taxes, development costs and
      General and Administrative Costs paid pursuant to Section
      6.01(b)(v)-(x).

     

    (c) Notwithstanding
      anything herein to the contrary, if not paid prior thereto, the Borrower hereby
      unconditionally promises to pay to the Administrative Agent for the account
      of
      each Lender the then unpaid principal amount of such Lender’s Loans and the
      accrued and unpaid interest thereon on the Maturity Date. 

     

    
      
        
        

      

      
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    Section
      3.02 Interest.

     

    (a) Interest
      Rates.
      The
      Borrower will pay to each Lender interest on the unpaid principal amount of
      its
      Loans for the period commencing on the date that such Loan is made to but
      excluding the date such Loan shall be paid in full at the Applicable Rate,
      but
      in no event to exceed the Highest Lawful Rate.

     

    (b) Post-Default
      Rate.
      Notwithstanding the foregoing, the Borrower will pay to the Lenders interest
      at
      the Post-Default Rate on the principal of the Loans, and (to the fullest extent
      permitted by law) on any fees and other amounts payable by the Borrower
      hereunder, under the Notes or under any other Loan Document, for the period
      commencing on the date of any Event of Default until the same is paid in full
      or
      all Events of Default are cured or waived (after as well as before
      judgment).

     

    (c) Due
      Dates.
      Accrued
      interest on the Loans shall be due and payable monthly on each Disbursement
      Date
      (regardless of whether or not funds are available from the Lockbox Account);
      provided
      that
(i)
      interest
      accrued pursuant to Section
      3.02(b)
      shall be
      payable on demand and (ii)
      in the
      event of any repayment or prepayment of any Loan pursuant to Section
      3.03(a)
      or
Section
      3.04,
      accrued
      interest on the principal amount repaid or prepaid shall be payable on the
      date
      of such repayment or prepayment.

     

    (d) Interest
      Rate Computations.
      All
      interest hereunder shall be computed on the basis of a year of 360 days, unless
      such computation would exceed the Highest Lawful Rate, in which case interest
      shall be computed on the basis of a year of 365 days (or 366 days in a leap
      year), and in each case shall be payable for the actual number of days elapsed
      (including the first day but excluding the last day).

     

    Section
      3.03 Prepayments.

     

    (a) Voluntary
      Prepayments.
      The
      Borrower may prepay all or any portion of the Loans upon not less than 10
      Business Days prior notice to the Lenders, which notice shall be irrevocable
      and
      shall specify the prepayment date (which shall be a Business Day) and the amount
      of the prepayment (which shall be at least the lesser of $100,000 or the
      remaining principal balance outstanding on the Loans) and effective only upon
      receipt by each Lender, provided
      that
      interest on the principal prepaid, accrued to the prepayment date, shall be
      paid
      on the prepayment date. Each prepayment of the Loans shall be applied ratably
      to
      all Loans then outstanding. 

     

    (b) Reborrowing
      Prohibited; Application of Prepayments.
      Any
      voluntary or mandatory payments or prepayments on the Loans may not be
      reborrowed.

     

    (c) No
      Penalty.
      Prepayments permitted or required under this Article III shall be without
      premium or penalty.

     

    Section
      3.04 Mandatory
      Repayments.
      In the
      event that the Borrower or its Affiliates sell, assign or otherwise dispose
      of
      any of their Oil and Gas Properties (other than asset sales permitted by
Section
      10.13(a)
      and
(b)),
      then
      the Borrower shall prepay the Loans together with accrued interest on such
      portion of the Loans so prepaid in accordance with Section
      3.02(c)
      on the
      date of such sale or other disposition of the Oil and Gas Properties occurs
      in
      an aggregate amount equal to, unless otherwise agreed to in writing by the
      Lenders, the proceeds of such sale or disposition (net of any Quarterly Taxes
      due and payable with respect to such Property sale), less all reasonable costs
      and fees associated with such sale or disposition, provided
      that
      such costs and fees are not in excess of 2% of the proceeds from such sale
      or
      disposition or are otherwise approved by the Lenders.

     

    
      
        
        

      

      
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    ARTICLE
      IV

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

     

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

     

    (a) Payments
      by the Borrower.
      The
      Borrower shall make each payment required to be made by it hereunder (whether
      of
      principal, interest, fees, or of amounts payable under Section
      5.01,
      Section
      5.02
      or
      otherwise) prior to 12:00 noon, New York, New York time, on the date when due,
      in immediately available funds, without defense, deduction, recoupment, set-off
      or counterclaim. Fees, once paid, shall not be refundable under any
      circumstances. Any amounts received after such time on any date may, in the
      discretion of the Administrative Agent, be deemed to have been received on
      the
      next succeeding Business Day for purposes of calculating interest thereon.
      All
      such payments shall be made to the Administrative Agent at its offices specified
      in Section
      13.01,
      except
      that payments pursuant to Section
      5.01,
      Section
      5.02
      and
Section
      13.03
      shall be
      made directly to the Persons entitled thereto. The Administrative Agent shall
      distribute any such payments received by it for the account of any other Person
      to the appropriate recipient promptly following receipt thereof. If any payment
      hereunder shall be due on a day that is not a Business Day, the date for payment
      shall be extended to the next succeeding Business Day, and, in the case of
      any
      payment accruing interest, interest thereon shall be payable for the period
      of
      such extension. All payments hereunder shall be made in dollars.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    ARTICLE
      V

    Increased
      Costs; Taxes

     

    Section
      5.01 Increased
      Costs.

     

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

     

    
      
        
        

      

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

     

    (c) Effect
      of Failure or Delay in Requesting Compensation.
      Failure
      or delay on the part of any Lender to demand compensation pursuant to this
      Section
      5.01
      shall
      not constitute a waiver of such Lender’s right to demand such
      compensation.

     

    Section
      5.02 Taxes.

     

    (a) Payments
      Free of Taxes.
      Any and
      all payments by or on account of any obligation of the Borrower or any Guarantor
      under any Loan Document shall be made free and clear of and without deduction
      for any Indemnified Taxes or Other Taxes; provided
      that if
      the Borrower or any Guarantor shall be required to deduct any Indemnified Taxes
      or Other Taxes from such payments, then (i) the
      sum payable shall be increased as necessary so that after making all required
      deductions (including deductions applicable to additional sums payable under
      this Section
      5.02),
      the
      Administrative Agent or Lenders (as the case may be) receives an amount equal
      to
      the sum it would have received had no such deductions been made, (ii) the
      Borrower or such Guarantor shall make such deductions and (iii) the
      Borrower or such Guarantor shall pay the full amount deducted to the relevant
      Governmental Authority in accordance with applicable law.

     

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

     

    (c) Indemnification
      by the Borrower.
      The
      Borrower shall indemnify the Administrative Agent and each Lender within 10
      days
      after written demand therefore, for the full amount of any Indemnified Taxes
      or
      Other Taxes paid by the Administrative Agent or such Lender, as the case may
      be,
      on or with respect to any payment by or on account of any obligation of the
      Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
      asserted on or attributable to amounts payable under this Section
      5.02)
      and any
      penalties, interest and reasonable expenses arising therefrom or with respect
      thereto, whether or not such Indemnified Taxes or Other Taxes were correctly
      or
      legally imposed or asserted by the relevant Governmental Authority. A
      certificate of the Administrative Agent or a Lender as to the amount of such
      payment or liability under this Section
      5.02
      shall be
      delivered to the Borrower and shall be conclusive absent manifest
      error.

     

    (d) Evidence
      of Payments.
      As soon
      as practicable, but in any event within 30 days after any payment of Indemnified
      Taxes or Other Taxes by the Borrower or a Guarantor to a Governmental Authority,
      the Borrower shall deliver to the Administrative Agent the original or a
      certified copy of a receipt issued by such Governmental Authority evidencing
      such payment, a copy of the return reporting such payment or other evidence
      of
      such payment reasonably satisfactory to the Administrative Agent.

     

    
      
        
        

      

      
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    ARTICLE
      VI

    Lockbox
      Procedures; Casualty Proceeds

     

    Section
      6.01 Lockbox
      Account.

     

    (a) The
      Borrower and the Administrative Agent shall establish by the Effective Date
      and
      maintain at the Borrower’s expense an interest-bearing account (the
“Lockbox
      Account”)
      under
      Administrative Agent’s exclusive control with a bank (the “Lockbox
      Bank”)
      reasonably acceptable to the Lenders which has entered into a lockbox account
      agreement pursuant to which all Cash Receipts to be received by the Borrower
      shall be deposited, and the Borrower shall direct (and hereby agrees to direct)
      each payor of any Cash Receipts now and in the future to make payment to such
      Lockbox Account. The Borrower hereby irrevocably appoints Administrative Agent
      as its attorney-in-fact (and such appointment shall be deemed to be coupled
      with
      an interest so long as any Loans remain outstanding) to address any direction
      letter or letter-in-lieu of division order executed by the Borrower it may
      hold
      and deliver or have delivered any such letter to any Person purchasing
      Hydrocarbons from the Oil and Gas Properties that is not then directing payment
      for such Hydrocarbons to the Lockbox Account.

     

    (b) On
      each
      Disbursement Date, Administrative Agent (on behalf of the Lenders) shall direct
      the Lockbox Bank to make the following payments from the Lockbox Account in
      the
      following order of priority and to the extent funds remain
      available:

     

    (i) amounts
      to the Borrower to (A) pay overriding royalty interests created by any ORRI
      Conveyance and to pay other royalties and overriding royalty interests (1)
      with
      respect to existing Oil and Gas Properties, to the extent such burdens exist
      at
      the time of the execution of this Agreement and (2) with respect to
      Properties that Borrower acquires subsequent to the date of this Agreement
      to
      the extent such burdens exist at the time that the Borrower acquires such
      Properties and is payable to non-Affiliated third parties, and (B) to remit
      any revenues attributable to the royalty, overriding royalty and working
      interests of third parties that were paid to or received by the Borrower, in
      each case, as the Lenders determine is reasonably accurate in its good faith
      discretion) and any applicable severance tax or ad-valorem tax attributable
      to
      all proceeds received by Borrower; 

     

    (ii) payment
      to any third party (including Lenders or any of their Affiliates) of any amounts
      due under any Swap Agreement of the Borrower approved by the
      Lenders;

     

    (iii) Operating
      Costs approved by the Lenders; 

     

    (iv) payment
      of any cash or cash equivalents representing proceeds of insurance policies
      with
      respect to any casualty to any of the Borrower’s Property (the “Casualty
      Proceeds”),
      to
      the Casualty Proceeds Account subject to and in accordance with the provisions
      of Section
      6.03;

     

    (v) payment
      of all fees owed to any of the Administrative Agent or the Lenders then due
      and
      unpaid under Section
      2.04;

     

    
      
        
        

      

      
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    (vi) payment
      of all interest then accrued and unpaid on the Loans;

     

    (vii) payment
      to the Administrative Agent and the Lenders of any other amounts due (other
      than
      principal on the Loans) under this Agreement and any of the other Loan
      Documents;

     

    (viii) payment
      of development costs, including any related capital expenditures, that are
      part
      of the approved Development Plan, which costs have been approved by the
      Administrative Agent to be funded from the Lockbox Account; provided,
      however,
      that
      any amounts so funded shall reduce the then available Commitment by the amount
      of such payments from the Lockbox; 

     

    (ix) General
      and Administrative Costs up to $100,000
      per month for the first six (6) months from the date of this Agreement, if
      cash
      is available in the waterfall as provided for in this Section
      6.01(b)(i)
      at such
      time. After six (6) months from the date of this Agreement, General and
      Administrative Costs up to $100,000 per month, provided
      that the
      amount of payment for General and Administrative Costs during each month in
      this
      time period may not exceed the amount of principal payment on the Debt during
      the same month (notwithstanding the fact that principal payments are provided
      for after General and Administrative Costs in item (xii) below for purposes
      of
      this Section
      6.01.

     

    (x) to
      the
      extent necessary, on the Monthly Dates for December, March, June and September
      amounts representing Quarterly Taxes (as approved by the Administrative Agent)
      for the holders of the Equity Interests of the Borrower to
      permit
      such Persons to pay taxes due and payable by such Persons in respect of the
      income of the Borrower;

     

    (xi) payment
      of all principal then due under Section
      3.01;
      and

     

    (xii) provided
      Borrower
      maintains a Twenty-Five Thousand Dollar ($25,000) balance in the Lockbox
      Account, payment to the Borrower of any such remaining amount in excess of
      such
      Twenty-Five Thousand Dollars ($25,000) balance, to an account designated by
      the
      Borrower. 

     

    (c) Upon
      the
      occurrence and during the continuation of any Event of Default, the
      Administrative Agent may, at its option, apply sums in the Lockbox Account
      to
      pay directly to the ultimate payee thereof some or all of the payments described
      in Section
      6.01(b),
      as the
      Lenders elect, including advances or prepayment to third Persons of expenditures
      incurred in the ordinary course of Borrower’s operation of its
      Properties.

     

    (d) Upon
      the
      Credit Agreement Termination Date, all amounts remaining in the Lockbox Account
      shall be disbursed to the Borrower to the account designated by the Borrower
      (the “Operating
      Account”)
      in a
      written notice given by the Borrower to the Lenders from time to time, not
      later
      than 12:00 noon New York, New York time on a day which is two Business Days
      prior to the date such payment shall become due.

     

    Section
      6.02 Notice.
      Immediately following execution of this Agreement, the Borrower shall send
      the
      Direction Letters, to all Persons that owe or are expected to owe Cash Receipts
      to the Borrower, directing such persons to forward all such amounts directly
      to
      the Lockbox Account. The Borrower hereby irrevocably appoints the Administrative
      Agent as its attorney-in-fact (such appointment being coupled with an interest)
      for sending any such notice to any Person who is or may become obligated to
      make
      any payment of Cash Receipts to the Borrower. With respect to Cash Receipts
      received directly by the Borrower, the Borrower shall within two Business Days
      deposit, or cause to be deposited, all such amounts in the Lockbox Account.
      If
      the Borrower has knowledge that any Person is in receipt of Cash Receipts that
      would otherwise be properly deposited in the Lockbox Account, the Borrower
      shall
      promptly notify such Person and the Administrative Agent in writing of such
      circumstance and shall direct such Person to deposit, or cause to be deposited,
      all such amounts in the Lockbox Account.

     

    
      
        
        

      

      
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    Section
      6.03 Casualty
      Proceeds.
      All
      Casualty Proceeds are hereby assigned by the Borrower to the Administrative
      Agent, and the Borrower shall have the right to collect any such payments,
      and
      such payments shall be deposited by the Lenders or the Administrative Agent
      in
      an account at the Lockbox Bank controlled by Administrative Agent (the
“Casualty
      Proceeds Account”).
      In
      the event of any casualty, the Borrower shall deliver within 30 days, a written
      report from an engineering firm acceptable to the Lenders describing the nature
      of the casualty, the nature of any restoration required, and a good faith
      estimate of the cost of such restoration. If the Lenders in their sole
      discretion determine that the remediation is not in its best interests, given
      the cost of such restoration and the affect such restoration would have on
      the
      amount and timing of repayment of the Loans, then the Lenders may apply such
      Casualty Proceeds to the prepayment of the outstanding principal balance and
      accrued interest of the Loans and the other Indebtedness, whether or not such
      Indebtedness is then due and payable. If the Lenders determine that such
      Casualty Proceeds shall be used for restoration, then the proceeds shall be
      disbursed from the Casualty Proceeds Account for such restoration in accordance
      with procedures reasonably determined by the Lenders consistent with
      construction loan funding principles. Notwithstanding the foregoing, if the
      Lenders determine that the Casualty Proceeds shall be used for restoration
      and
      such Casualty Proceeds are less than $50,000, then such amount shall be
      disbursed from the Casualty Proceeds Account to the Borrower and the Borrower
      shall utilize such proceeds solely for restoration of such
      casualty.

     

    ARTICLE
      VII

    Conditions
      Precedent

     

    Section
      7.01 Initial
      Funding.
      The
      obligations of the Lenders to make their Loans under the Initial Funding shall
      not become effective until the date on which each of the following conditions
      is
      satisfied (or waived in accordance with Section
      13.02):

     

    (a) The
      Administrative Agent, the Arranger and the Lenders shall have received all
      fees
      and other amounts due and payable on or prior to the Effective Date, including,
      to the extent invoiced, reimbursement or payment of all out-of-pocket expenses
      required to be reimbursed or paid by the Borrower hereunder.

     

    (b) The
      Administrative Agent shall have received a certificate of the Secretary or
      an
      Assistant Secretary of the Borrower setting forth (i)
      resolutions of its Board of Managers or similar body with respect to the
      authorization of such Person to execute and deliver the Loan Documents to which
      it is a party and to enter into the transactions contemplated in those
      documents, (ii)
      the
      officers or other designated persons of such (y) who are authorized to sign
      the
      Loan Documents to which such Person is a party and (z) who will, until replaced
      by another officer or officers duly authorized for that purpose, act as its
      representative for the purposes of signing documents and giving notices and
      other communications in connection with this Agreement and the transactions
      contemplated hereby, (iii)
      specimen
      signatures of such authorized officers, and (iv)
      the
      certificate of incorporation, bylaws, certificate of formation, operating
      agreement, partnership agreement or other similar organizational documents,
      of
      each Person, certified as being true and complete. The Administrative Agent
      and
      the Lenders may conclusively rely on such certificate until the Administrative
      Agent receives notice in writing from the applicable Person to the
      contrary.

     

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

     

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

     

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

     

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

     

    (g) The
      Borrower shall have delivered to the Administrative Agent the Initial Funding
      Disbursement Request in the amount of the Initial Funding.

     

    (h) The
      Administrative Agent shall have received from the Borrower duly executed
      counterparts of the ORRI Conveyances for each Lenders with respect to the
      Borrower’s Oil and Gas Properties as of the date of such funding.

     

    (i) The
      Administrative Agent shall have received from the Borrower and each holder
      of
      any Equity Interest in the Borrower, duly executed counterparts of the
      Participation Agreement for each Lender.

     

    (j) The
      Administrative Agent shall have received from each party thereto duly executed
      counterparts (in such number as may be requested by the Administrative Agent)
      of
      the Security Instruments, including the Security Agreement, the Pledge Agreement
      and the other Security Instruments described on Exhibit
      F-1.
      In
      connection with the execution and delivery of the Security Instruments, the
      Administrative Agent shall:

     

    (i) be
      reasonably satisfied that the Security Instruments create first priority,
      perfected Liens on the Collateral, such Liens being subject only to Excepted
      Liens identified in clauses (a) to (e) of the definition thereof, but subject
      to
      the provisos at the end of such definition; 

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    (ii) have
      received certificates, together with undated, blank stock powers for each such
      certificate, representing all of the issued and outstanding Equity Interests
      of
      the Borrower and each Affiliate of Borrower; and

     

    (k) The
      Administrative Agent shall have received an opinion of Glast Phillips &
Murray, special counsel to the Borrower, substantially in the form of
Exhibit
      E
      hereto.

     

    (l) The
      Administrative Agent shall have received a certificate of insurance coverage
      of
      the Borrower evidencing that the Borrower is carrying insurance in accordance
      with Section
      8.13.

     

    (m) The
      Administrative Agent shall have received title information as the Administrative
      Agent may require satisfactory to the Administrative Agent setting forth the
      status of title to the Borrower’s and its Affiliates’ Oil and Gas Properties as
      of the Effective Date. 

     

    (n) The
      Administrative Agent shall be satisfied with the environmental condition of
      the
      Oil and Gas Properties of the Borrower and have received such reports as in
      form
      and scope satisfactory to the Administrative Agent and the Lenders as they
      may
      request related thereto, including a Phase 1 Environmental Report with respect
      to all wells a part of the Oil and Gas Properties of the Borrower.

     

    (o) The
      Administrative Agent shall have received a certificate of a Responsible Officer
      of the Borrower certifying that the Borrower has received all consents and
      approvals required by Section
      8.03.

     

    (p) The
      Administrative Agent shall have received (i)
      the
      financial statements referred to in Section
      8.04(a),
      (ii)
      the
      certificate covering the matters described in Section
      9.12(b)
      and
(iii)
      copies
      of all material contracts or agreements, including, but not limited to, all
      operating agreements covering the Oil and Gas Properties, as well as all
      marketing, transportation, and processing agreements related to such Oil and
      Gas
      Properties.

     

    (q) The
      Administrative Agent shall have received appropriate UCC search certificates
      reflecting no prior Liens encumbering the Properties of the Borrower for each
      of
      the following jurisdictions: State of Texas and the following Texas counties:
      Anderson, Harrison and Shackelford and any other jurisdiction reasonably
      requested by the Administrative Agent. The Administrative Agent shall have
      received appropriate UCC search certificates reflecting no prior Liens
      encumbering the Properties being pledged pursuant to the Pledge Agreement for
      the State of Texas and any other jurisdiction requested by the Administrative
      Agent. 

     

    (r) [Intentionally
      omitted.]

     

    (s) The
      Administrative Agent shall be satisfied that there are no negative price
      deviations in oil and gas prices that would have a Material Adverse Effect
      on
      the value of the Borrower’s Oil and Gas Properties.

     

    (t) The
      Administrative Agent shall be satisfied that there has been no Material Adverse
      Effect to the Borrower since March 31, 2005.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    (u) The
      Administrative Agent shall have received Letters-in-Lieu executed in blank
      by
      the Borrower, in such quantity as the Administrative Agent may reasonably
      request.

     

    (v) The
      Administrative Agent shall have received Direction Letters executed in blank
      by
      the Borrower, in such quantity as the Administrative Agent may reasonably
      request.

     

    (w) Since
      March 31, 2005, there shall not have been any disruption or adverse change
      in
      the financial or capital markets.

     

    (x) The
      Borrower and the Lenders shall have agreed upon the Development
      Plan.

     

    (y) The
      Administrative Agent shall be reasonably satisfied with the potential plugging
      and abandonment liabilities associated with the Oil & Gas Properties,
      including, without limitation, the bonding or collateralization obligations
      of
      the Borrower associated therewith.

     

    (z) The
      Administrative Agent shall have completed, and be satisfied with, its due
      diligence review of the Borrower, its operations including title, engineering,
      and environmental and financial condition, the Material Agreements and such
      other Agreements as Lenders may determine, the Oil & Gas Properties and
      other related matters.

     

    (aa) The
      Administrative Agent and Lenders will be satisfied with Borrower’s current tax
      position.

     

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

     

    The
      Administrative Agent shall notify the Borrower and the Lenders of the Effective
      Date, and such notice shall be conclusive and binding. Notwithstanding the
      foregoing, the obligations of the Lenders to make Loans hereunder shall not
      become effective unless each of the foregoing conditions is satisfied (or waived
      pursuant to Section
      13.02)
      at or
      prior to 2:00 p.m., New York, New York time, on September 15, 2005 (and, in
      the
      event such conditions are not so satisfied or waived, the Commitments shall
      terminate at such time).

     

    Section
      7.02 Subsequent
      Fundings.
      The
      obligation of the Lenders to make Loans to the Borrower with respect to any
      Subsequent Fundings for which a Subsequent Commitment Increase has been approved
      by the Lenders in accordance with Section
      2.01(b)
      is
      subject to the following conditions:

     

    (a) The
      satisfaction of the conditions set forth in Section
      7.03.

     

    (b) The
      delivery to the Lenders and their approval (in their sole discretion) in writing
      of (i) a Subsequent Commitment Increase Request (delivered by the Borrower
      to
      the Lenders at least 30 days, but not more than 90 days, prior to the date
      when
      the first Invoice Disbursement Request relating thereto is to be delivered
      by
      the Borrower to the Lender) relating to a specific Development Project and
      (ii)
      an Invoice Disbursement Request relating to an approved Subsequent Commitment
      Increase Request. The Lenders’ approval, if any, of any Subsequent Commitment
      Increase Request shall be at their sole and unfettered discretion; any such
      approval will require that with respect to (A) any Development Project,
      such Development Project is in accordance with the (x) Development Plan
      (including as to scope of work, the means and method of the work, the cost
      of
      the work, and the timing for the commencement and completion of the work),
      and
      (y) other information delivered to the Lenders in connection with the Subsequent
      Commitment Increase Request and (B) any acquisition of any additional Oil
      and Gas Properties, Borrower shall provide such information as the Lenders
      may
      request. No Lenders shall have any obligation to approve any Subsequent
      Commitment Increase Request. 

     

    (c) In
      the
      case of a Subsequent Funding relating to the acquisition of any additional
      Oil
      and Gas Properties, the satisfaction of the conditions (modified as appropriate
      to apply to the relevant acquisition of additional Oil and Gas Properties)
      set
      forth in Sections 7.01(b), (h), (j), (l), (m), (n), (q), (r), (u), (v), (x),
      (z), and (aa) with respect to such additional Oil and Gas
      Properties.

     

    (d) Lenders
      are satisfied with Borrower’s current hedging position taking into consideration
      any proposed Development Projects being proposed in connection with a Subsequent
      Funding.

     

    Section
      7.03 All
      Fundings.
      The
      obligation of the Lenders to make Loans to the Borrower upon the occasion of
      each Borrowing hereunder (including the Initial Funding) is subject to the
      further conditions precedent that, as of the date of such Borrowing and after
      giving effect thereto:

     

    (a) no
      Default shall have occurred and be continuing;

     

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

     

    (c) the
      representations and warranties made or deemed made by the Borrower or any
      Affiliate in Article VIII and in the Loan Documents shall be true and correct
      on
      and as of the date of such Borrowing with the same force and effect as if made
      on and as of such date and following such new Borrowing, except to the extent
      such representations and warranties are expressly limited to an earlier date
      or
      the Lenders may expressly consent in writing to the contrary.

     

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

     

    Section
      7.05 No
      Waiver.
      No
      waiver of any condition precedent shall preclude the Lenders from requiring
      such
      condition to be met prior to making any subsequent advance of the
      Loans.

     

    
      
        
        

      

      
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    ARTICLE
      VIII

    Representations
      and Warranties

     

    The
      Borrower represents and warrants to the Lenders that:

     

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

     

    Section
      8.02 Authority;
      Enforceability.
      The
      Transactions are within the Borrower’s and each Guarantor’s powers and have been
      duly authorized by all necessary corporate, company or partnership (as
      applicable) action and, if required, shareholder, partner and/or member action.
      Each Loan Document to which the Borrower and each Guarantor is a party has
      been
      duly executed and delivered by the Borrower and such Guarantor and constitutes
      a
      legal, valid and binding obligation of the Borrower and such Guarantor, as
      applicable, enforceable in accordance with its terms, subject to applicable
      bankruptcy, insolvency, reorganization, moratorium or other laws affecting
      creditors’ rights generally and subject to general principles of equity,
      regardless of whether considered in a proceeding in equity or at
      law.

     

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

     

    Section
      8.04 Financial
      Condition; No Material Adverse Change.

     

    (a) The
      Borrower has heretofore furnished to the Administrative Agent and the Arranger
      the consolidated balance sheet and statements of income, partners’ capital and
      cash flows for the Borrower and its Consolidated Affiliates (i) as of and for
      the fiscal year ended December 31, 2004, and (ii) as of and for that portion
      of
      the fiscal year ended June 30, 2005, certified by its Financial Officer. Such
      financial statements present fairly, in all material respects, the financial
      position and results of operations and cash flows of the Borrower and its
      Consolidated Affiliates as of such dates and of such periods in accordance
      with
      GAAP, subject to year-end audit adjustments and the absence of footnotes in
      the
      case of the unaudited quarterly financial statements. 

     

    
      
        
        

      

      
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    (b) Since
      March 31, 2005, (i)
      there
      has been no event, development or circumstance that has had or could reasonably
      be expected to have a Material Adverse Effect and (ii)
      the
      business of the Borrower or its Affiliates has been conducted only in the
      ordinary course consistent with past business practices.

     

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

     

    Section
      8.05 Litigation.
      

     

    (a) Except
      as
      set forth on Schedule 8.05,
      there
      are no actions, suits, investigations or proceedings by or before any arbitrator
      or Governmental Authority pending against or, to the knowledge of the Borrower,
      threatened against or affecting the Borrower or any Affiliates (i)
      that is
      not fully covered by insurance (except for normal deductibles), or (ii)
      that
      involve any Loan Document or the Transactions.

     

    (b) Since
      the
      date of this Agreement, there has been no negative change in the status of
      the
      matters disclosed in Schedule 8.05.

     

    Section
      8.06 Environmental
      Matters.
      Except
      as is set forth on Schedule
      8.06:

     

    (a) neither
      any Property of the Borrower or any Affiliate nor the operations conducted
      thereon violate any order or requirement of any court or Governmental Authority
      or any Environmental Laws.

     

    (b) no
      Property of the Borrower or any Affiliate nor the operations currently conducted
      thereon or, to the knowledge of the Borrower, by any prior owner or operator
      of
      such Property or operation, are in violation of or subject to any existing,
      pending or threatened action, suit, investigation, inquiry or proceeding by
      or
      before any court or Governmental Authority or to any remedial obligations under
      Environmental Laws.

     

    (c) all
      notices, permits, licenses, exemptions, approvals or similar authorizations,
      if
      any, required to be obtained or filed in connection with the operation or use
      of
      any and all Property of the Borrower and each Affiliate, including, without
      limitation, past or present treatment, storage, disposal or release of a
      hazardous substance, oil and gas waste or solid waste into the environment,
      have
      been duly obtained or filed, and the Borrower and each Affiliate are in
      compliance with the terms and conditions of all such notices, permits, licenses
      and similar authorizations.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    (g) neither
      the Borrower nor any Affiliate has any known contingent liability or Remedial
      Work in connection with any release or threatened release of any oil, hazardous
      substance, solid waste or oil and gas waste into the environment.

     

    (h) neither
      the Borrower’s nor any Affiliate’s oil and gas operations on its Oil and Gas
      Properties are subject to any environmental assessment requirements under the
      National Environmental Policy Act or any analogous Governmental Regulation
      or
      any other environmental review or assessment requirements in excess of
      environmental review and assessment requirements required in connection with
      Borrower and its Affiliates obtaining any permits or other required
      authorizations in completing recent wells on their Properties.

     

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

     

    (a) Each
      of
      the Borrower and each Affiliate is in material compliance with all Governmental
      Requirements applicable to it or its Property and all agreements and other
      instruments binding upon it or its Property, and possesses all material
      licenses, permits, franchises, exemptions, approvals and other governmental
      authorizations necessary for the ownership of its Property and the conduct
      of
      its business. 

     

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

     

    
      
        
        

      

      
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    (c) No
      Default has occurred and is continuing.

     

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

     

    Section
      8.09 Public
      Utility Holding Company Act.
      Neither
      the Borrower nor any Affiliate is a “holding company,” or a “subsidiary company”
of a “holding company,” or an “affiliate” of a “holding company” or of a
“subsidiary company” of a “holding company,” or a “public utility” within the
      meaning of, or subject to regulation under, the Public Utility Holding Company
      Act of 1935, as amended.

     

    Section
      8.10 Taxes.
      Each of
      the Borrower and its Affiliates has timely filed or caused to be filed all
      Tax
      returns and reports required to have been filed and has paid or caused to be
      paid all Taxes required to have been paid by it, except Taxes that are being
      contested in good faith by appropriate proceedings and for which the Borrower
      or
      such Affiliate, as applicable, has set aside adequate reserves in accordance
      with GAAP. The charges, accruals and reserves on the books of the Borrower
      and
      its Subsidiaries in respect of Taxes and other governmental charges are, in
      the
      reasonable opinion of the Borrower, adequate. No Lien for Taxes has been filed
      and, to the knowledge of the Borrower, no claim is being asserted with respect
      to any such Tax or other such governmental charge.

     

    Section
      8.11 ERISA.
      

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (e) Full
      payment when due has been made of all amounts which the Borrower, the Affliates
      or any ERISA Affiliate is required under the terms of each Plan or applicable
      law to have paid as contributions to such Plan as of the date hereof, and no
      accumulated funding deficiency (as defined in section 302 of ERISA and section
      412 of the Code), whether or not waived, exists with respect to any
      Plan.

     

    (f) The
      actuarial present value of the benefit liabilities under each Plan which is
      subject to Title IV of ERISA does not, as of the end of the Borrower’s most
      recently ended fiscal year, exceed the current value of the assets (computed
      on
      a plan termination basis in accordance with Title IV of ERISA) of such Plan
      allocable to such benefit liabilities. The term “actuarial present value of the
      benefit liabilities” shall have the meaning specified in section 4041 of
      ERISA.

     

    (g) Neither
      the Borrower, the Affiliates nor any ERISA Affiliate sponsors, maintains, or
      contributes to an employee welfare benefit plan, as defined in section 3(1)
      of
      ERISA, including, without limitation, any such plan maintained to provide
      benefits to former employees of such entities, that may not be terminated by
      the
      Borrower, a Affiliate or any ERISA Affiliate in its sole discretion at any
      time
      without any material liability.

     

    (h) Neither
      the Borrower, the Affiliates nor any ERISA Affiliate sponsors, maintains or
      contributes to, or has at any time in the six-year period preceding the date
      hereof sponsored, maintained or contributed to, any Multiemployer
      Plan.

     

    (i) Neither
      the Borrower, the Affiliates nor any ERISA Affiliate is required to provide
      security under section 401(a)(29) of the Code due to a Plan amendment that
      results in an increase in current liability for the Plan.

     

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

     

    Section
      8.13 Insurance.
      Schedule
      8.13
      attached
      hereto contains an accurate and complete description of all material policies
      of
      fire, liability, workmen’s compensation and other forms of insurance that are
      owned or held by or on behalf of the Borrower. All such policies are in full
      force and effect, all premiums with respect thereto covering all periods up
      to
      and including the date of the closing have been paid, and no notice of
      cancellation or termination has been received with respect to any such policy.
      Such policies are sufficient for compliance with all Governmental Requirements
      and all agreements to which the Borrower is a party; are valid, outstanding
      and
      enforceable policies; provide adequate insurance coverage for the assets and
      operations of the Borrower in at least such amounts and against at least such
      risks (but including in any event public liability) as are usually insured
      against in the same general area by companies engaged in the same or a similar
      business; will remain in full force and effect through the respective dates
      set
      forth in Schedule
      8.13;
      and
      will not in any way be affected by, or terminate or lapse by reason of, the
      transactions contemplated by this Agreement and the Loan Documents. Neither
      the
      Borrower (nor to Borrower’s knowledge any prior owner of the Oil and Gas
      Properties) has been refused any insurance with respect to its assets or
      operations, nor has it been limited below usual and customary policy limits,
      by
      an insurance carrier to which it has applied for any insurance or with which
      it
      has carried insurance during the last three years. The Administrative Agent
      and
      the Lenders have been named as additional insureds in respect of such liability
      insurance policies and the Administrative Agent has been named as loss payee
      with respect to property loss insurance.

     

    
      
        
        

      

      
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    Section
      8.14 Restriction
      on Liens.
      Neither
      the Borrower nor any of the Affiliates is a party to any material agreement
      or
      arrangement, or subject to any order, judgment, writ or decree, that either
      restricts or purports to restrict its ability to grant Liens to the
      Administrative Agent and the Lenders on or in respect of their Properties to
      secure the Indebtedness and the Loan Documents.

     

    Section
      8.15 Subsidiaries.
      Except
      as set forth on Schedule
      8.15
      and
      except for Borrower, which is a Subsidiary of Parent, neither Parent nor
      Borrower has any Subsidiaries.

     

    Section
      8.16 Location
      of Business and Offices.
      The
      Borrower’s jurisdiction of organization is the State of Texas; the name of the
      Borrower as listed in the public records of its jurisdiction of organization
      is
      Crosspoint Energy Holdings, LLC; and the organizational identification number
      of
      the Borrower in its jurisdiction of organization is 800529737 (or,
      in
      each case, as set forth in a notice delivered to the Administrative Agent
      pursuant to Section
      9.01(m)
      in
      accordance with Section
      13.01).
      The
      Borrower’s principal place of business and chief executive offices are located
      at the address specified in Section
      13.01
      (or as
      set forth in a notice delivered pursuant to Section
      9.01(m)
      and
Section
      13.01(c)).
      Each
      Affiliate’s jurisdiction of organization, name as listed in the public records
      of its jurisdiction of organization and its organizational identification number
      in its jurisdiction of organization, and the location of its principal place
      of
      business and chief executive office is stated on Schedule
      8.15
      (or as
      set forth in a notice delivered pursuant to Section
      9.01(m)).

     

    Section
      8.17 Properties;
      Titles, Etc.

     

    (a) Except
      as
      provided on Schedule
      8.17,
      after
      giving full effect to the Excepted Liens and except for the ORRI Conveyance,
      the
      Borrower owns the working interests and net interests in production attributable
      to the Oil and Gas Properties reflected in the Initial Reserve Report and set
      forth in Schedule
      8.17
      and the
      ownership of such Oil and Gas Properties shall not in any material respect
      obligate the Borrower to bear the costs and expenses relating to the
      maintenance, development and operations of each such Property in an amount
      in
      excess of the working interest of each Oil and Gas Property set forth in
Schedule
      8.17.
      All
      information contained in the most recently delivered Reserve Report is true
      and
      correct in all material respects as of the date thereof. No litigation or claims
      are currently pending, or the best knowledge of the Borrower, threatened which
      would question the Borrower’s title to the Oil and Gas Properties.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    (b) Except
      as
      provided on Schedule
      8.17,
      all oil
      and gas leases and material agreements referenced in the Initial Reserve Report
      or the title opinions delivered in connection with the Initial Funding are
      valid
      and subsisting, in full force and effect and there exists no default or event
      or
      circumstance which with the giving of notice or the passage of time or both
      would give rise to a default under any such lease or leases, which would affect
      in any material respect the conduct of the business of the
      Borrower.

     

    (c) The
      Property then owned, leased or licensed by the Borrower and its Affiliates
      including, without limitation, all easements and rights of way, is all of the
      Property necessary to permit the Borrower and its Affiliates to conduct their
      oil and gas development business in all material respects in the manner as
      would
      a prudent operator and Borrower and its Affiliates will not be required to
      acquire any material assets to conduct the proposed operations of Borrower’s and
      its Affiliates’ Properties other than the replacement of equipment in the
      ordinary course of business and other acquisitions as contemplated by the
      Development Plan.

     

    (d) All
      fixtures, improvements and personal property included in the Properties of
      the
      Borrower and its Affiliates which are reasonably necessary for the operation
      of
      its business are in good working condition and are maintained in accordance
      with
      prudent business standards.

     

    (e) The
      Borrower and each Affiliate owns, or will be licensed to use, all trademarks,
      tradenames, copyrights, patents and other intellectual Property material to
      its
      business, and the use thereof by the Borrower and such Affiliate will not
      infringe upon the rights of any other Person. The Borrower and its Affiliates
      either will own or have valid licenses or other rights to use all databases,
      geological data, geophysical data, engineering data, seismic data, maps,
      interpretations and other technical information used or usable in the conduct
      of
      their businesses, subject to the limitations contained in the agreements
      governing the use of the same, which limitations will be customary for companies
      engaged in the business of the exploration and production of
      Hydrocarbons.

     

    Section
      8.18 Maintenance
      of Properties.
      The Oil
      and Gas Properties (and Properties unitized therewith) have been maintained,
      operated and developed in a good and workmanlike manner and in material
      conformity with all Government Requirements and in material conformity with
      the
      provisions of all leases, subleases or other contracts comprising a part of
      the
      Hydrocarbon Interests and other contracts and agreements forming a part of
      the
      Oil and Gas Properties: specifically in connection with the foregoing
(i)
      no Oil
      and Gas Property is subject to having allowable production reduced below the
      full and regular allowable (including the maximum permissible tolerance) because
      of any overproduction (whether or not the same was permissible at the time)
      and
(ii)
      none of
      the wells comprising a part of the Oil and Gas Properties (or Properties
      unitized therewith) is deviated from the vertical more than the maximum
      permitted by Government Requirements, and such wells are, in fact, bottomed
      under and are producing from, and the well bores are wholly within, the Oil
      and
      Gas Properties (or in the case of wells located on Properties unitized
      therewith, such unitized Properties). All pipelines, wells, gas processing
      plants, platforms and other material improvements, fixtures and equipment owned
      in whole or in part by the Borrower or any of its Affiliates that are necessary
      to conduct normal operations are being maintained in a state adequate to conduct
      normal operations, and with respect to such of the foregoing that are operated
      by the Borrower or any of its Affiliates, in a manner consistent with the
      Borrower’s or its Affiliates’ past practices.

     

    
      
        
        

      

      
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    Section
      8.19 Gas
      Imbalances,
      Prepayments.
      As of
      December 31, 2004, except as set forth on Schedule
      8.19,
      on a
      net basis there are no gas imbalances, take or pay or other prepayments that
      would require the Borrower or any of its Affiliates to deliver Hydrocarbons
      produced from the Oil and Gas Properties at some future time without then or
      thereafter receiving full payment therefor. Except as set forth on Schedule
      8.19,
      no
      material gas imbalances exist as of December 31, 2004 with respect to any of
      the
      Borrower’s Oil and Gas Properties.

     

    Section
      8.20 Marketing
      of Production.
      Except
      for contracts listed and in effect on the date hereof on Schedule
      8.20,
      and
      thereafter either disclosed in writing to the Administrative Agent or included
      in the most recently delivered Reserve Report (with respect to all of which
      contracts the Borrower represents that it or its Affiliates 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 that are not cancelable on 60 days notice or less
      without penalty or detriment for the sale of production from the Borrower’s or
      its Affiliates’ 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 expiration date of longer than six (6) months from the date hereof.
      All proceeds from the sale of the Borrower’s interests in Hydrocarbons from its
      Oil and Gas Properties will be paid in full to the Borrower 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
      8.20,
      none of
      the Borrower’s Oil and Gas Properties 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 60 days, and in the case of gas,
      not
      in excess of 90 days). Except as set forth on Schedule
      8.20,
      none of
      the Oil and Gas Properties of the Borrower is subject to a contractual or other
      arrangement for the sale of oil or gas production for a fixed price which cannot
      be canceled on 90 days (or less) notice or which contains terms which are not
      customary in the industry. None of the Oil and Gas Properties of Borrower is
      subject at present to any regulatory refund obligation and no facts exist which
      might cause the same to be imposed.

     

    Section
      8.21 Swap
      Agreements.
      Schedule
      8.21,
      as of
      the date hereof, and after the date hereof, each report required to be delivered
      by the Borrower pursuant to Section
      9.01(d),
      sets
      forth a true and complete list of all Swap Agreements of the Borrower and each
      Affiliate, the material terms thereof (including the type, term, effective
      date,
      termination date and notional amounts or volumes), the net mark to market value
      thereof, all credit support agreements relating thereto (including any margin
      required or supplied) and the counterparty to each such agreement.

     

    Section
      8.22 Use
      of
      Loans.
      The
      proceeds of the Loans shall be used to pay the costs associated with the
      approved Development Projects set forth in the Development Plan, pay the
      commitment fee referenced in Sections 2.03 and 2.04 and pay the other costs
      of
      the transactions related to this Agreement. The Borrower and its Affiliates
      are
      not engaged principally, or as one of its or their important activities, in
      the
      business of extending credit for the purpose, whether immediate, incidental
      or
      ultimate, of buying or carrying margin stock (within the meaning of Regulation
      T, U or X of the Board). No part of the proceeds of any Loans will be used
      for
      any purpose which violates the provisions of Regulations T, U or X of the
      Board.

     

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

     

    Section
      8.24 Casualty
      Events.
      Since
      March 31, 2005, neither the business nor any Properties of the Borrower have
      been materially and adversely affected as a result of any fire, explosion,
      earthquake, flood, drought, windstorm, accident, strike or other labor
      disturbance, embargo, requisition or taking of Property or cancellation of
      contracts, permits or concessions by any domestic or foreign Governmental
      Authority, riot, activities or armed forces or acts of God or of any public
      enemy.

     

    Section
      8.25 Material
      Agreements.
      Set
      forth on Schedule
      8.25
      hereto
      is a complete and correct list of all material agreements and other instruments
      of the Borrower currently in effect setting forth each counterparty thereto
      (other than the Loan Documents) relating to the purchase, transportation by
      pipeline, gas processing, marketing, development, sale and supply of
      Hydrocarbons, farmout arrangements, joint operating agreements, contract
      operating agreements or other material contracts (excluding oil and gas leases
      of the Borrower) to which the Borrower is a party on or after the Effective
      Date
      or by which its Properties is bound on or after the Effective Date (collectively
      “Material
      Agreements”)
      and
      copies of such documents have been provided to the Administrative Agent. All
      such agreements are in full force and effect and the Borrower is not in default
      thereunder, nor is there any uncured default by any Affiliate predecessor in
      interest to the Borrower or, to the Borrower’s knowledge, by any predecessor in
      interest to the Borrower (other than an Affiliate predecessor) or counterparty
      thereto, nor has the Borrower altered any material item of such agreements
      since
      the Effective Date without the prior written consent of the
      Lenders.

     

    
      
        
        

      

      
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    Section
      8.26 No
      Brokers.
      Except
      for a fee to Premier Capital of $50,000, no Person is entitled to any brokerage
      fee or finders fee or similar fee or commission in connection with arranging
      the
      Loans contemplated by this Agreement. 

     

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

     

    Section
      8.28 Investments
      and Guaranties.
      The
      Borrower has not made any investments in, advances to or guaranties of the
      obligations of any Person, except as reflected in the financial statements
      described in Section
      9.01(a).

     

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

     

    Section
      8.30 Existing
      Accounts Payable.
      Set
      forth on Schedule
      8.30
      hereto
      is a complete and correct list of all existing accounts payable of the Borrower
      that are more than 30 days past due as of the Effective Date.

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    ARTICLE
      IX

    Affirmative
      Covenants

     

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

     

    Section
      9.01 Financial
      Statements; Other Information.
      The
      Borrower will furnish to the Administrative Agent and the Arranger:

     

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

     

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

     

    (c) Certificate
      of Financial Officer - Compliance.
      Concurrently with any delivery of financial statements under Section
      9.01(a)
      or
Section
      9.01(b),
      a
      certificate of a Financial Officer in substantially the form of Exhibit
      D
      hereto
(i)
      certifying as to whether a Default has occurred and, if a Default has occurred,
      specifying the details thereof and any action taken or proposed to be taken
      with
      respect thereto, (ii)
      setting
      forth reasonably detailed calculations demonstrating compliance with
Section
      9.13(b)
      and
Section
      10.01,
      (iii)
      stating
      whether any change in GAAP or in the application thereof has occurred since
      March 31, 2005 and, if any such change has occurred, specifying the effect
      of
      such change on the financial statements accompanying such certificate, (iv)
      if,
      at any time, all of the Consolidated Affiliates of the Borrower are not
      Consolidated Affiliates, setting forth consolidating spreadsheets that show
      all
      Consolidated Affiliates and the eliminating entries, in such form as would
      be
      presentable to the auditors of the Borrower.

     

    (d) Certificate
      of Financial Officer - Swap Agreements.
      Concurrently with any delivery of financial statements under Section
      9.01(a)
      and
Section
      9.01(b),
      a
      certificate of a Financial Officer, in form and substance satisfactory to the
      Administrative Agent, setting forth as of the last Business Day of such fiscal
      quarter or fiscal year, a true and complete list of all Swap Agreements of
      the
      Borrower and each Affiliate, the material terms thereof (including the type,
      term, effective date, termination date and notional amounts or volumes), the
      net
      mark-to-market value therefore, any new credit support agreements relating
      thereto not listed on Schedule
      8.21,
      any
      margin required or supplied under any credit support document, and the
      counterparty to each such agreement. 

     

    
      
        
        

      

      
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    (e) Certificate
      of Insurer - Insurance Coverage.
      Concurrently with any delivery of financial statements under Section
      9.01(a),
      a
      certificate of insurance coverage from each insurer with respect to the
      insurance required by Section
      9.07,
      in form
      and substance satisfactory to the Administrative Agent, and, if requested by
      the
      Administrative Agent or the Arranger, all copies of the applicable
      policies.

     

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

     

    (g) Cash
      Flow.
      Within
      45 days after the end of each calendar quarter, a current operating forecast
      of
      the Borrower and its Affiliates as of the end of such calendar quarter and
      as of
      the fiscal year to date.

     

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

     

    (i) Notices
      Under Material Instruments.
      Promptly after the furnishing thereof, copies of any financial statement,
      material report or material notice (as way of example, notices of default,
      acceleration or substantial non-compliance are types of material notices)
      furnished to or by any Person pursuant to the terms of any preferred stock
      designation, indenture, loan or credit or other similar agreement, other than
      this Agreement and not otherwise required to be furnished to the Administrative
      Agent or the Arranger pursuant to any other provision of this Section
      9.01.

     

    (j) Lists
      of Purchasers.
      Concurrently with the delivery of any Reserve Report to the Administrative
      Agent
      pursuant to Section
      9.12,
      a list
      of all Persons purchasing Hydrocarbons from the Borrower or any
      Affiliate.

     

    (k) Notice
      of Sales of Oil and Gas Properties.
      In the
      event the Borrower or any Affiliate intends to sell, transfer, assign or
      otherwise dispose of any Oil or Gas Properties or any Equity Interests in any
      Affiliate in accordance with Section
      10.13,
      prior
      written notice of such disposition, the price thereof and the anticipated date
      of closing.

     

    (l) Notice
      of Litigation/Casualty Events.
      Prompt
      written notice, and in any event within five Business Days, of the delivery
      of
      any demand letter, or the filing of any lawsuit or arbitration proceeding with
      an expected potential liability in excess of $50,000, or the occurrence of
      any
      Casualty Event or the commencement of any action or proceeding that could
      reasonably be expected to result in a demand notice, lawsuit, arbitration
      proceeding, or Casualty Event with respect to Borrower.

     

    
      
        
        

      

      
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    (m) Information
      Regarding Borrower and Guarantors.
      Prompt
      written notice (and in any event within twenty-five (25) days prior thereto)
      of
      any change (i) in
      the Borrower or any Guarantor’s name or in any trade name used to identify such
      Person in the conduct of its business or in the ownership of its Properties,
      (ii) in
      the location of the Borrower or any Guarantor’s chief executive office or
      principal place of business, (iii) in
      the Borrower or any Guarantor’s identity or structure or in the jurisdiction in
      which such Person is incorporated or formed, (iv)
      in the
      Borrower or any Guarantor’s jurisdiction of organization or such Person’s
      organizational identification number in such jurisdiction of organization,
      and
(v) in
      the Borrower or any Guarantor’s federal taxpayer identification
      number.

     

    (n) Production
      Report and Lease Operating Statements.
      Within
      25 days after the end of each calendar month, a report setting forth, for such
      calendar month, the volume of production and sales attributable to production
      (and the prices at which such sales were made and the revenues derived from
      such
      sales) for such calendar month from the Oil and Gas Properties, and setting
      forth the related ad valorem, severance and production taxes and lease operating
      expenses attributable thereto and incurred for such calendar month. Weekly,
      a
      report setting forth, on a daily basis for the previous week, 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).

     

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

     

    (i) in
      connection with the delivery by the Borrower of any Invoice Disbursement
      Request, a report through the end of the prior month setting forth as to each
      Development Project (each well on an individual well by well basis), the actual
      vs. estimated cost breakdown (for all activities, including dry hole and
      completion activities) for such Development Project; 

     

    (ii) on
      a
      monthly basis by the 25th of each month a cumulative report through the end
      of
      the prior month setting forth estimates of all
      amounts to be disbursed pursuant to Section
      3.01
      and
Section
      6.01(b),
      including a schedule identifying each category of payments identified as clauses
      (i)
      through
(x)
      of
Section
      6.01(b),
      with a
      detailed schedule of all items in each such clause.

     

    (iii) such
      other information as the Lenders may reasonably request with respect to
      drilling, operation or property status matters, including notice of any material
      changes with regard to oil and gas prices received, contracts or production
      expenses or any material litigation affecting the operation of the Oil and
      Gas
      Properties of the Borrower.

     

    (p) Notices
      of Certain Changes.
      Promptly, but in any event within five (5) Business Days after the execution
      thereof, copies of any amendment, modification or supplement to the certificate
      or articles of incorporation, certificate of formation, by-laws, limited
      liability company agreement, any preferred stock designation or any other
      organic document of the Borrower or any Affiliate.

     

    
      
        
        

      

      
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    (q) ORRI
      Payments.
      Promptly, but in any event within five (5) Business Days thereof, Borrower
      shall
      deliver to the Arranger a statement of all amounts paid to the Lenders under
      any
      ORRI Conveyance.

     

    (r) Board
      of Managers/Members Materials.
      Promptly following any request therefore, such materials and minutes for
      meetings of the members or managers of the Borrower (other than any materials
      or
      information governed by a confidentiality agreement prohibiting the sharing
      of
      such information with the Administrative Agent or the Lenders).

     

    (s) Partner
      Metrics.
      On a
      monthly basis, by the 25th day of each month Borrower will provide Arranger
      in
      the form and in the medium designated by Arranger such information as may be
      required to generate the reporting package that Arranger has previously
      indicated with respect to the PartnerMetrics reporting package.

     

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

     

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

     

    (a) the
      occurrence of any Default of the occurrence of any event that with notice or
      lapse of time, or both, would constitute an Event of Default;

     

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

     

    (c) the
      filing or commencement of any action, suit, proceeding, or arbitration by or
      on
      behalf of the Borrower or any of its Affiliates claiming or asserting damages
      in
      favor of the Borrower of its Affiliates valued in excess of $50,000;

     

    (d) the
      occurrence of any ERISA Event that, alone or together with any other ERISA
      Events that have occurred, could reasonably be expected to result in liability
      of the Borrower and its Affiliates in an aggregate amount exceeding
      $50,000;

     

    (e) the
      occurrence of any event described in Schedule
      9.02(e);

     

    
      
        
        

      

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

     

    Each
      notice delivered under this Section
      9.02
      shall be
      accompanied by a statement of a Responsible Officer setting forth the details
      of
      the event or development requiring such notice and any action taken or proposed
      to be taken with respect thereto.

     

    Section
      9.03 Existence;
      Conduct of Business.
      The Borrower will, and will cause each Affiliate to, do or cause to be done
      all
      things necessary to preserve, renew and keep in full force and effect its legal
      existence and the rights, licenses, permits, privileges and franchises material
      to the conduct of its business and maintain, if necessary, its qualification
      to
      do business in each jurisdiction in which its Oil and Gas Properties is located
      or the ownership of its Properties requires such qualification.

     

    Section
      9.04 Payment
      of Obligations.
      The Borrower will, and will cause each Affiliate to, pay its obligations
      (including Tax liabilities of the Borrower and all of its Affiliates and any
      agreement material to the business or operations of the Borrower or its
      Affiliates) before the same shall become delinquent or in default, unless the
      Borrower is disputing such obligations in good faith and has set aside an
      adequate reserve for such unpaid obligations (except if, notwithstanding such
      good faith dispute and set aside of adequate reserves, the failure to pay could
      reasonably be expected to result in a Material Adverse Effect).

     

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

     

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

     

    (a) operate
      its Oil and Gas Properties and other material Properties or cause such Oil
      and
      Gas Properties and other material Properties to be operated in a good and
      workmanlike manner in accordance with reasonable prudent operator standards
      and
      the practices of the industry and in compliance with all applicable contracts
      and agreements and in material compliance with all material Governmental
      Requirements, including, without limitation, applicable proration requirements
      and Environmental Laws, and all applicable laws, rules and regulations of every
      other Governmental Authority from time to time constituted to regulate the
      development and operation of its Oil and Gas Properties and the production
      and
      sale of Hydrocarbons and other minerals therefrom.

     

    (b) keep,
      preserve and maintain all Oil and Gas Properties and any other Property material
      to the conduct of its business in good repair, working order and condition,
      ordinary wear and tear excepted.

     

    (c) promptly
      pay and discharge, or make reasonable and customary efforts to cause to be
      paid
      and discharged, all delay rentals, royalties, expenses and indebtedness accruing
      under the leases or other agreements affecting or pertaining to its Oil and
      Gas
      Properties and will do all other reasonable things necessary to keep unimpaired
      their rights with respect thereto and prevent any forfeiture thereof or default
      thereunder.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    (d) promptly
      perform or make reasonable and customary efforts to cause to be performed,
      in
      accordance with industry standards, the material obligations required by each
      and all of the assignments, deeds, leases, sub-leases, contracts and agreements
      affecting its interests in its Oil and Gas Properties and other material
      Properties.

     

    (e) To
      the
      extent the Borrower is not the operator of any Property, the Borrower shall
      use
      reasonable efforts to cause the operator to comply with this Section
      9.06.

     

    (f) The
      Borrower will do or cause to be done such development work as may be reasonably
      necessary to the prudent and economical operation of Borrower’s and its
      Affiliates’ Oil and Gas Properties material to the Borrower or such Affiliate
      and such in accordance with the most approved practices of operators in the
      industry, including all to be done that may be appropriate to protect from
      diminution the productive capacity of the Oil and Gas Properties and each
      producing well thereon including, without limitation, cleaning out and
      reconditioning each well from time to time, plugging and completing at a
      different level each such well, drilling a substitute well to conform to changed
      spacing regulations and to protect the Oil and Gas Properties material to the
      Borrower and its Affiliates against drainage whenever and as often as is
      reasonably necessary.

     

    Section
      9.07 Insurance.
      The Borrower will, and will cause each Affiliate to, maintain, with financially
      sound and reputable insurance companies, insurance in such amounts and against
      such risks as are customarily maintained by companies engaged in the same or
      similar businesses operating in the same or similar locations but in any event
      it will maintain at a minimum the types of insurance and in such amounts as
      reflected on Schedule
      8.13.
      The
      loss payable clauses or provisions in said insurance policy or policies insuring
      any of the collateral for the Loans shall be endorsed in favor of and made
      payable to the Administrative Agent as its interests may appear and such
      policies shall name the Administrative Agent and the Lenders as “additional
      insureds” and provide that the insurer will endeavor to give at least thirty
      (30) days prior notice of any cancellation to the Administrative
      Agent.

     

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

     

    Section
      9.09 Compliance
      with Laws.
      The Borrower will, and will cause each Affiliate to, comply with all laws,
      rules, regulations and orders of any Governmental Authority applicable to it
      or
      its Property, except where the failure to do so, individually or in the
      aggregate, could not reasonably be expected to result in a Material Adverse
      Effect.

     

    
      
        
        

      

      
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    Section
      9.10 Environmental
      Matters.

     

    (a) The
      Borrower shall
      at
      its sole expense: (i)
      comply,
      and shall cause its Properties and operations and each Affiliate and each
      Affiliate’s Properties and operations to comply, with all applicable
      Environmental Laws; (ii)
      not
      dispose of or otherwise release, and shall cause each Affiliate not to dispose
      of or otherwise release, any oil, oil and gas waste, hazardous substance, or
      solid waste on, under, about or from any of the Borrower’s or its Affiliates’
Properties or any other Property to the extent caused by the Borrower’s or any
      of its Affiliates’ operations except in compliance with applicable Environmental
      Laws; (iii)
      timely
      obtain or file, and shall cause each Affiliate to timely obtain or file, all
      notices, permits, licenses, exemptions, approvals, registrations or other
      authorizations, if any, required under applicable Environmental Laws to be
      obtained or filed in connection with the operation or use of the Borrower’s or
      its Affiliates’ Properties; (iv)
      promptly
      commence and diligently prosecute to completion, and shall cause each Affiliate
      to promptly commence and diligently prosecute to completion, any assessment,
      evaluation, investigation, monitoring, containment, cleanup, removal, repair,
      restoration, remediation or other remedial obligations (collectively, the
“Remedial
      Work”)
      in the
      event any Remedial Work is required or reasonably necessary under applicable
      Environmental Laws because of or in connection with the actual or suspected
      past, present or future disposal or other release of any oil, oil and gas waste,
      hazardous substance or solid waste on, under, about or from any of the
      Borrower’s or its Affiliates’ Properties, which failure to commence and
      diligently prosecute to completion; and (v)
      establish and implement, and shall cause each Affiliate to establish and
      implement, such procedures as may be necessary to continuously determine and
      assure that the Borrower’s and its Affiliates’ obligations under this
Section
      9.10(a)
      are
      timely and fully satisfied.

     

    (b) The
      Borrower will promptly, but in no event later than five (5) Business Days of
      the
      occurrence of a triggering event, notify the Administrative Agent and the
      Arranger in writing of any threatened action, investigation or inquiry by any
      Governmental Authority or any demand or threatened lawsuit by any landowner
      or
      other third party against the Borrower or its Affiliates or their Properties
      of
      which the Borrower has knowledge in connection with any Environmental Laws
      (excluding routine testing and corrective action) if the Borrower reasonably
      anticipates that such action may result in liability (whether individually
      or in
      the aggregate) in excess of $50,000, not fully covered by insurance, subject
      to
      normal deductibles.

     

    (c) The
      Borrower will, and will cause each Affiliate to, provide environmental audits
      and tests in accordance with American Society of Testing Materials standards
      upon request by the Administrative Agent and the Arranger in connection with
      any
      future acquisitions of Oil and Gas Properties or other Properties. No more
      than
      once per year in the absence of any Event of Default (or as otherwise required
      to be obtained by the Administrative Agent or the Arranger by any Governmental
      Authority), the Borrower will, and will cause each Affiliate to, provide
      environmental audits and tests in accordance with American Society of Testing
      Materials standards upon request by the Administrative Agent and the Arranger
      in
      connection with any Oil and Gas Properties or other Properties then owned by
      the
      Borrower or any Affiliate.

     

    
      
        
        

      

      
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    Section
      9.11 Further
      Assurances.

     

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

     

    (b) The
      Borrower hereby authorizes the Administrative Agent to file one or more
      financing or continuation statements, and amendments thereto, relative to all
      or
      any part of the Mortgaged Property without the signature of the Borrower or
      any
      other Guarantor where permitted by law, provided a copy of all such documents
      shall be furnished to Borrower within five (5) Business Days subsequent to
      filing such documents. A carbon, photographic or other reproduction of the
      Security Instruments or any financing statement covering the Mortgaged Property
      or any part thereof shall be sufficient as a financing statement where permitted
      by law.

     

    Section
      9.12 Reserve
      Reports.

     

    (a) Commencing
      on February 15, 2006 and on or before each February 15 and August 15 thereafter,
      the Borrower shall furnish to the Administrative Agent and the Arranger a
      Reserve Report effective as the previous January 1st
      and July
      1st,
      as
      applicable. The January 1st
      Reserve
      Report shall be prepared by one or more Approved Petroleum Engineers.
      

     

    (b) With
      the
      delivery of each Reserve Report, the Borrower shall provide to the
      Administrative Agent and the Arranger a certificate from a Responsible Officer
      certifying that in all material respects: (i)
      to the
      best of their knowledge, the information contained in the Reserve Report and
      any
      other information delivered in connection therewith is true and correct,
(ii)
      the
      Borrower or its Affiliates owns good and defensible title to the interests
      in
      the Oil and Gas Properties evaluated in such Reserve Report and such interests
      in the Properties are free of all Liens except for Liens permitted by
Section
      10.03,
      (iii)
      except
      as set forth on an exhibit to the certificate, on a net basis there are no
      gas
      imbalances, take or pay or other prepayments in excess of the volume specified
      in Section
      8.19
      with
      respect to its Oil and Gas Properties evaluated in such Reserve Report which
      would require the Borrower or any Affiliate to deliver Hydrocarbons either
      generally or produced from such Oil and Gas Properties at some future time
      without then or thereafter receiving full payment therefore, (iv)
      none of
      their interests in the Oil and Gas Properties have been sold since the date
      of
      the previous Reserve Report delivered except as set forth on an exhibit to
      the
      certificate, which certificate shall list all of its Oil and Gas Properties
      sold
      and in such detail as reasonably required by the Administrative Agent,
(v)
      attached
      to the certificate is a list of all marketing agreements entered into subsequent
      to the later of the date hereof or the most recently delivered Reserve Report
      which the Borrower could reasonably be expected to have been obligated to list
      on Schedule
      8.20
      or
Schedule
      8.25
      had such
      agreement been in effect on the date hereof and (vi)
      all of
      the Oil and Gas Properties evaluated by such Reserve Report are Mortgaged
      Properties.

     

    
      
        
        

      

      
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    (c) In
      connection with the delivery of the Reserve Reports to be delivered in Section
      9.12(a) above, the Borrower shall also furnish to the Administrative Agent
      and
      the Arranger a reserve report with respect to the Oil and Gas Properties
      conveyed to the Lenders as part of any ORRI Conveyance provided to the Lenders
      under this Agreement provided such properties are still owned by the
      Lenders.

     

    Section
      9.13 Title
      Information.

     

    (a) On
      or
      before the delivery to the Administrative Agent and the Arranger of each Reserve
      Report required by Section
      9.12(a),
      the
      Borrower will deliver title information in form and substance acceptable to
      the
      Administrative Agent covering enough of the Oil and Gas Properties evaluated
      by
      such Reserve Report that were not included in the immediately preceding Reserve
      Report or with respect to which title information was not previously provided,
      so that the Administrative Agent shall have received, together with title
      information previously delivered to the Administrative Agent, satisfactory
      title
      information on all of the Oil and Gas Properties evaluated by such Reserve
      Report.

     

    (b) If
      the
      Borrower has provided title information for additional Properties under
Section
      9.13(a),
      the
      Borrower shall, within sixty (60) days of notice from the Administrative Agent
      that title defects or exceptions exist with respect to such additional
      Properties, either (i)
      cure any
      such title defects or exceptions (including defects or exceptions as to
      priority) that are not permitted by Section
      10.03
      raised
      by such information, (ii)
      substitute acceptable Mortgaged Properties with no title defects or exceptions
      except for Excepted Liens (other than Excepted Liens described in clause (f)
      of
      such definition) having an equivalent value or (iii)
      deliver
      title information in form and substance acceptable to the Administrative Agent
      so that the Administrative Agent shall have received, together with title
      information previously delivered to the Administrative Agent, satisfactory
      title
      information on all of the value of the Oil and Gas Properties evaluated by
      such
      Reserve Report.

     

    Section
      9.14 Additional
      Collateral; Additional Guarantors.

     

    (a) Promptly
      after the end of each calendar quarter, the Borrower shall review the current
      Mortgaged Properties to ascertain whether all Oil and Gas Properties are
      Mortgaged Properties. If the Mortgaged Properties do not represent all such
      Properties, then the Borrower shall, and shall cause its Affiliates to, grant
      to
      the Administrative Agent as security for the Indebtedness a senior Lien interest
      (subject only to Excepted Liens of the type described in clauses (a) to (e)
      of
      the definition thereof, but subject to the provisos at the end of such
      definition) on additional Oil and Gas Properties not already subject to a Lien
      of the Security Instruments such that after giving effect thereto, the Mortgaged
      Properties will represent all such Properties. All such Liens will be created
      and perfected by and in accordance with the provisions of deeds of trust,
      security agreements and financing statements or other Security Instruments,
      all
      in form and substance reasonably satisfactory to the Administrative Agent and
      in
      sufficient executed (and acknowledged where necessary or appropriate)
      counterparts for recording purposes. In order to comply with the foregoing,
      if
      any Affiliate places a Lien on its Oil and Gas Properties and such Affiliate
      is
      not a Guarantor, then it shall become a Guarantor and comply with Section
      9.14(b).

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

    (b) The
      Borrower shall promptly cause each Affiliate to guarantee the Indebtedness
      pursuant to a guaranty agreement in form and substance reasonably acceptable
      to
      the Lenders. In connection with any such guaranty, the Borrower shall, or shall
      cause such Affiliate to: (A) execute and deliver such guaranty agreement,
      (B) pledge all of the Equity Interests of such Affiliate (including,
      without limitation, delivery of original stock certificates evidencing the
      Equity Interests of such Affiliate, together with an appropriate undated stock
      power for each certificate duly executed in blank by the registered owner
      thereof), (C) grant a lien in and to all of the Properties of such
      Affiliate (including, without limitation, the Oil and Gas Properties of such
      Affiliate) pursuant to the Security Agreement and such other deeds of trust,
      mortgages, agreements and instruments, in form and substance satisfactory to
      the
      Administrative Agent, as the Administrative Agent may request and
      (D) execute and deliver such other additional closing documents,
      certificates and legal opinions as shall reasonably be requested by the
      Administrative Agent.

     

    (c) The
      Borrower will at all times cause all of the Properties of the Borrower and
      each
      Affiliate to be subject to a Lien of the Security Instruments.

     

    (d) All
      of
      the issued and outstanding Equity Interests of the Borrower shall at all times
      be pledged to the Administrative Agent pursuant to the Pledge Agreement (other
      than any Equity Interests that may be issued pursuant to the Warrant
      Agreement).

     

    Section
      9.15 ERISA
      Compliance.
      The Borrower will promptly furnish and will cause the Affiliates and any ERISA
      Affiliate to promptly furnish to the Administrative Agent (i)
      promptly
      after the filing thereof with the United States Secretary of Labor, the Internal
      Revenue Service or the PBGC, copies of each annual and other report with respect
      to each Plan or any trust created thereunder, (ii)
      immediately upon becoming aware of the occurrence of any ERISA Event or of
      any
“prohibited transaction,” as described in section 406 of ERISA or in section
      4975 of the Code, in connection with any Plan or any trust created thereunder,
      a
      written notice signed by the President or a Financial Officer, the Affiliate
      or
      the ERISA Affiliate, as the case may be, specifying the nature thereof, what
      action the Borrower, the Affiliate or the ERISA Affiliate is taking or proposes
      to take with respect thereto, and, when known, any action taken or proposed
      by
      the Internal Revenue Service, the Department of Labor or the PBGC with respect
      thereto, and (iii)
      immediately upon receipt thereof, copies of any notice of the PBGC’s intention
      to terminate or to have a trustee appointed to administer any Plan. With respect
      to each Plan (other than a Multiemployer Plan), the Borrower will, and will
      cause each Affiliate and ERISA Affiliate to, (i)
      satisfy
      in full and in a timely manner, without incurring any late payment or
      underpayment charge or penalty and without giving rise to any lien, all of
      the
      contribution and funding requirements of section 412 of the Code (determined
      without regard to subsections (d), (e), (f) and (k) thereof) and of section
      302
      of ERISA (determined without regard to sections 303, 304 and 306 of ERISA),
      and
(ii)
      pay, or
      cause to be paid, to the PBGC in a timely manner, without incurring any late
      payment or underpayment charge or penalty, all premiums required pursuant to
      sections 4006 and 4007 of ERISA.

     

    
      
        
        

      

      
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    Section
      9.16 Swap
      Agreements.
      After Borrower has achieved for twenty (20) days or more an average production
      net to Borrower of 2,000,000 Mmcfe per day, the Borrower shall from time to
      time
      enter into Swap Agreements in respect of commodities so that the notional
      volumes of all Swap Agreements, in the aggregate, are more than 75% of the
      reasonably anticipated projected production from Borrower’s Proved Developed
      Producing Reserves for each month during the term of this Agreement.

     

    Section
      9.17 Marketing
      of Production.
      All Hydrocarbons produced from the Oil and Gas Properties shall be marketed
      on
      an arms-length basis using one or more Persons that are not Affiliates of the
      Borrower, as reasonably satisfactory to the Arranger.

     

    Section
      9.18 Overriding
      Royalty Interests.

     

    (a) As
      additional consideration for the making of the Loans by the Lenders, the
      Borrower agrees to convey to the Lenders, in undivided shares proportionate
      to
      their respective Commitments, an overriding royalty interest in the aggregate
      amount specified below in and to the Oil and Gas Properties referred to below.
      The overriding royalty shall be conveyed with respect to (i) each of the
      Oil and Gas Properties currently owned by the Borrower or any Affiliate and
      (ii) any additional Oil and Gas Property acquired by the Borrower or any
      Subsidiary or in which the Borrower or any Affiliate acquires an additional
      interest, in each case after the Effective Date through the date this Agreement
      is terminated. 

     

    (b) The
      overriding royalty interest in any Oil and Gas Property required to be conveyed
      with respect to any well shall equal (i) three percent (3%) of 8/8ths, and
      shall be proportionately reduced to the interest in the Oil and Gas Properties
      owned by the Borrower in each of the Oil and Gas Properties. The overriding
      royalty shall be subject to the terms and conditions set forth in the form
      of
      the ORRI Conveyance, and any other agreements currently in existence as of
      the
      time of the acquisition of such Properties and validly affecting the underlying
      leases.

     

    (c) An
      overriding royalty required to be conveyed hereby: (i) with respect to any
      well
      now in existence shall be effective as of the first day of the calendar month
      in
      which this Agreement is executed, and with respect to any future well, the
      first
      day of the calendar month in which the relevant well was completed or acquired,
      (ii) shall be substantially in the form of the ORRI Conveyance, (iii) shall
      be
      executed and filed for recording by the Borrower promptly after the receipt,
      delivery and recording of applicable assignments into the Borrower establishing
      its interest of record in any Oil and Gas Properties, (iv) shall be delivered
      by
      the Borrower to the Lenders promptly after its return from recording, and (v)
      shall survive any termination of the Credit Agreement.

     

    (d) If,
      prior
      to finalization of the division order process, the Borrower receives proceeds
      of
      production from a well with respect to which the Borrower is required to convey
      an overriding royalty under this Section
      9.18,
      the
      Borrower shall estimate the amount of such revenue payable on account of the
      overriding royalty and shall pay such estimated proceeds to the Lenders;
provided
      that,
      upon the completion of the division order process, if any amounts are determined
      to have been overpaid or underpaid to the Lenders, the Borrower and the Lenders
      shall promptly make appropriate adjustments among themselves to give effect
      to
      the correct division of interests, retroactive to the effective date of such
      overriding royalty.

     

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

    (e) Within
      forty-five (45) days after the end of each fiscal quarter, the Borrower will
      prepare a summary of all wells spudded during the preceding fiscal quarter.
      Such
      summary shall indicate the date each well was completed (or anticipated to
      be
      completed) and those wells for which an override pursuant to (c) above has
      been
      recorded in the appropriate land records and delivered to the Lenders. For
      those
      wells where no override has been filed of record, an approximate date of when
      the Borrower expects such override to be recorded.

     

    Section
      9.19 Right
      of First Refusal.
      If at any time during the term of this Agreement, Borrower desires to make
      any
      acquisition or to develop any project, Borrower shall present to Arranger a
      financing request for such projects at least thirty (30) days prior to the
      proposed closing date for such transaction, including, without limitation,
      all
      financial data that Borrower has developed with respect to such projects and
      such other documentation required under this Agreement with respect to any
      acquisition or to develop any development project that is to be funded under
      this Agreement as a Subsequent Funding, and any other information which Arranger
      may reasonably request so as to enable Arranger to evaluate and determine
      whether Arranger shall offer to finance such proposed project through this
      Agreement or another facility agented by the Administrative Agent and with
      the
      Lenders as the lenders thereunder. Administrative Agent shall have twenty (20)
      days after receipt of such notice from Borrower within which to present to
      Borrower a proposed funding. Borrower may accept or reject such proposal in
      its
      sole discretion. 

     

    Section
      9.20 Separate
      Entity.
      Borrower will, (a) take all necessary steps to maintain its separate entity
      and
      records, (b) not commingle any assets or business functions with any other
      Person, (c) maintain separate financial statements, (d) not assume or guarantee
      the debts, liabilities or obligations of others, (e) not hold itself out to
      the
      public and creditors as an entity separate from others, (f) not commit any
      fraud
      or misuse of the separate entity legal status or any other injustice or
      unfairness, (g) not maintain its assets in such a manner that it will be costly
      or difficult to segregate, ascertain or identify its individual assets from
      those of its partners or Affiliates, (h) not take any action that might cause
      it
      to become insolvent, (i) not fail to hold appropriate meetings (or act by
      unanimous written consent) to authorize all appropriate actions, or fail in
      authorizing such actions, to observe all formalities required by the laws of
      the
      State of Texas, relating to limited liability companies, or fail to observe
      all
      formalities required by its organizational documents, (j) not hold itself out
      to
      be responsible for the debts of another Person and (k) not share any common
      logo
      with or hold itself out as or be considered as a department or division of
      its
      partners, an Affiliate, or any other person or entity. 

     

    Section
      9.21 Partner
      Metrics.
      Borrower will cooperate and take all reasonable actions as may be requested
      of
      Borrower by Arranger in order to implement the Partner Metrics reporting package
      on a timely basis.

     

    
      
        
        

      

      
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    ARTICLE
      X

     

    Negative
      Covenants

     

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

     

    Section
      10.01 Financial
      Covenants.

     

    (a) Ratio
      of Total Debt to EBITDA.
      The
      Borrower will not, at any time, permit the Borrower’s ratio of Total Debt
      (excluding current account payable that are not more than sixty (60) days past
      their invoice date) as of the last day of any fiscal quarter to annualized
      EBITDA for such period as of such time to be greater than the ratio set forth
      below for the applicable period. The foregoing ratio shall be annualized by
      multiplying EBITDA by four (4).

     

    
      	
              Quarter
                Ending

            	 	
              Ratio

            	 
	
              March
                31, 2006

            	 	 	
              4.00:1.00

            	 
	
              June
                30, 2006 and thereafter

            	 	 	
              3.00:1.00

            	 

    

    

    (b) Ratio
      of EBITDA to Interest and Rents.
      The
      Borrower will not permit on the last day of the applicable period set forth
      below the Borrower’s ratio of EBITDA to the sum of (A) Consolidated
      Interest Expense and (B) Consolidated Rents to be less than the ratio set
      forth below for the applicable period.

     

    
      	
              Quarter
                Ending

            	 	
              Ratio

            	 
	
              March
                31, 2006

            	 	 	
              2.00:1.00

            	 
	
              June
                30, 2006 and thereafter

            	 	 	
              3.00:1.00

            	 

    

     

    (c) Current
      Ratio.
      The
      Borrower will not permit, as of the last day of any fiscal quarter, the
      Borrower’s ratio of (A) consolidated current assets (excluding non-cash
      assets under FAS 133) to (B) consolidated current liabilities (excluding
      current maturities of long term Debt unless such Debt is current as a result
      of
      a default or event of default or has otherwise been accelerated) to be less
      than
      1.00:1.00. 

     

    (d) Reserve
      Ratios to Total Debt.
      After
      March 31, 2006, the Borrower will not permit, as of the last day of any fiscal
      quarter, its ratio of the Net Present Value of Proved Developed Producing
      Reserves to Total Debt to be less than 1.00:1.00. The Borrower will not permit,
      as of the last day of any fiscal quarter, its ratio of the Net Present Value
      of
      Total Proved Reserves to Total Debt to be less than 2.00:1.00. The foregoing
      ratios shall be determined by reference to the most recent Reserve Report,
      based
      on a price curve determined by Arranger.

     

    Section
      10.02 Debt.
      Except as set forth on Schedule
      10.02,
      the
      Borrower will not, and will not permit any Affiliate to, incur, create, assume
      or suffer to exist any Debt, except:

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

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

     

    (b) Debt
      of
      Borrower and its Affiliates existing on the date hereof that is reflected in
      the
      Financial Statements.

     

    (c) accounts
      payable and accrued expenses, liabilities or other obligations to pay the
      deferred purchase price of Property or services, from time to time incurred
      in
      the ordinary course of business that are not greater than sixty (60) days past
      the date of invoice or delinquent and that are being contested in good faith
      by
      appropriate action and for which adequate reserves have been maintained in
      accordance with GAAP.

     

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

     

    Section
      10.03 Liens.
      Except as set forth on Schedule
      10.03,
      the
      Borrower will not, and will not permit any Affiliate to, create, incur, assume
      or permit to exist any Lien on any of its Properties (now owned or hereafter
      acquired), except:

     

    (a) Liens
      securing the payment of any Indebtedness.

     

    (b) Excepted
      Liens.

     

    Section
      10.04 Redemptions.
      The Borrower will not, and will not permit any of its Affiliates to, declare
      or
      make, or agree to pay or make, directly or indirectly, any Restricted Payment,
      return any capital to its stockholders or make any distribution of its Property
      to its Equity Interest holders other than Quarterly Tax Distributions in
      accordance with Section
      6.01(b).
      Notwithstanding the preceding, any Wholly-Owned Affiliate may make Restricted
      Payments to the Borrower. 

     

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

     

    (a) Investments
      reflected in the Financial Statements or that are disclosed to the
      Administrative Agent or the Arranger in Schedule
      10.05.

     

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

     

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

     

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

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

    (e) deposits
      maturing within one year from the date of creation thereof with, including
      certificates of deposit issued by, any Lender or any office located in the
      United States of any other bank or trust company which is organized under the
      laws of the United States or any state thereof, has capital, surplus and
      undivided profits aggregating at least $100,000,000 (as of the date of such
      bank
      or trust company’s most recent financial reports) and has a short term deposit
      rating of no lower than A2 or P2, as such rating is set forth from time to
      time,
      by S&P or Moody’s, respectively.

     

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

     

    Section
      10.06 Nature
      of Business.
      Neither the Borrower nor any Affiliate will allow any material change to be
      made
      in the character of its business as an independent oil and gas exploration
      and
      production company. From and after the date hereof, the Borrower and its
      Affiliates will not acquire or make any other expenditure (whether such
      expenditure is capital, operating or otherwise) in or related to, any Oil and
      Gas Properties not located within the geographical boundaries of the United
      States.

     

    Section
      10.07 Limitation
      on Leases.
      Except with respect to the leases set forth on Schedule
      10.07,
      neither
      the Borrower nor any Affiliate will create, incur, assume or suffer to exist
      any
      obligation for the payment of rent or hire of Property of any kind whatsoever
      (real or personal but excluding Capital Leases and leases of Hydrocarbon
      Interests), under leases or lease agreements which would cause the aggregate
      amount of all payments made by the Borrower and the Affiliates pursuant to
      all
      such leases or lease agreements, including, without limitation, any residual
      payments at the end of any lease, to exceed $25,000 in any period of twelve
      consecutive calendar months during the life of such leases without the approval
      of the Lenders.

     

    Section
      10.08 Sale
      and Leasebacks.
      The Borrower will not enter into any arrangement, directly or indirectly, with
      any Person whereby the Borrower shall sell or transfer any of its Property,
      whether now owned or hereafter acquired, and whereby the Borrower shall then
      or
      thereafter rent or lease such Property or any part thereof or other Property
      that the Borrower intends to use for substantially the same purpose or purposes
      as the Property sold or transferred.

     

    Section
      10.09 Proceeds
      of Notes.
      The Borrower will not permit the proceeds of the Notes to be used for any
      purpose other than those permitted by Section
      8.22.
      Neither
      the Borrower nor any Person acting on behalf of the Borrower has taken or will
      take any action which might cause any of the Loan Documents to violate
      Regulations T, U or X or any other regulation of the Board or to violate Section
      7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder,
      in each case as now in effect or as the same may hereinafter be in effect.
      If
      requested by the Administrative Agent, the Borrower will furnish to the
      Administrative Agent and each Lender a statement to the foregoing effect in
      conformity with the requirements of FR Form U-1 or such other form referred
      to
      in Regulation U, Regulation T or Regulation X of the Board, as the case may
      be.

     

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

    Section
      10.10 ERISA
      Compliance.
      The Borrower and the Affiliates will not at any time:

     

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

     

    (b) terminate,
      or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any
      other action with respect to any Plan, which could result in any liability
      of
      the Borrower, an Affiliate or any ERISA Affiliate to the PBGC.

     

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

     

    (d) permit
      to
      exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding
      deficiency within the meaning of section 302 of ERISA or section 412 of the
      Code, whether or not waived, with respect to any Plan.

     

    (e) permit,
      or allow any ERISA Affiliate to permit, the actuarial present value of the
      benefit liabilities under any Plan maintained by the Borrower, an Affiliate
      or
      any ERISA Affiliate which is regulated under Title IV of ERISA to exceed
      the current value of the assets (computed on a plan termination basis in
      accordance with Title IV of ERISA) of such Plan allocable to such benefit
      liabilities. The term “actuarial present value of the benefit liabilities” shall
      have the meaning specified in section 4041 of ERISA.

     

    (f) contribute
      to or assume an obligation to contribute to, or permit any ERISA Affiliate
      to
      contribute to or assume an obligation to contribute to, any Multiemployer
      Plan.

     

    (g) acquire,
      or permit any ERISA Affiliate to acquire, an interest in any Person that causes
      such Person to become an ERISA Affiliate with respect to the Borrower or an
      Affiliate or with respect to any ERISA Affiliate of the Borrower or an Affiliate
      if such Person sponsors, maintains or contributes to, or at any time in the
      six-year period preceding such acquisition has sponsored, maintained, or
      contributed to, (i)
      any
      Multiemployer Plan, or (ii)
      any
      other Plan that is subject to Title IV of ERISA under which the actuarial
      present value of the benefit liabilities under such Plan exceeds the current
      value of the assets (computed on a plan termination basis in accordance with
      Title IV of ERISA) of such Plan allocable to such benefit
      liabilities.

     

    (h) incur,
      or
      permit any ERISA Affiliate to incur, a liability to or on account of a Plan
      under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA.

     

    (i) contribute
      to or assume an obligation to contribute to, or permit any ERISA Affiliate
      to
      contribute to or assume an obligation to contribute to, any employee welfare
      benefit plan, as defined in section 3(1) of ERISA, including, without
      limitation, any such plan maintained to provide benefits to former employees
      of
      such entities, that may not be terminated by such entities in their sole
      discretion at any time without any material liability.

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

    (j) amend,
      or
      permit any ERISA Affiliate to amend, a Plan resulting in an increase in current
      liability such that the Borrower, an Affiliate or any ERISA Affiliate is
      required to provide security to such Plan under section 401(a)(29) of the
      Code.

     

    Section
      10.11 Sale
      or Discount of Receivables.
      Except for receivables obtained by the Borrower or any Affiliate out of the
      ordinary course of business or the settlement of joint interest billing accounts
      in the ordinary course of business or discounts granted to settle collection
      of
      accounts receivable or the sale of defaulted accounts arising in the ordinary
      course of business in connection with the compromise or collection thereof
      and
      not in connection with any financing transaction, neither the Borrower nor
      any
      Affiliate will discount or sell (with or without recourse) any of its notes
      receivable or accounts receivable.

     

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

     

    Section
      10.13 Sale
      of Properties.
      Borrower will not, and will not permit any Affiliate to, sell, assign, farm-out,
      convey or otherwise transfer (including through the sale of a production payment
      or overriding royalty interest) any Property except for(a)
      the sale
      of Hydrocarbons in the ordinary course of business; (b)
      the sale
      or transfer of equipment that is no longer necessary for the business of the
      Borrower or such Affiliate or is replaced by equipment of at least comparable
      value and use; and (c)
      the sale
      or transfer of any Property that, taken together with the sale of any other
      Properties during any calendar year, in the aggregate, has a fair market value
      of less than $50,000.

     

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

     

    Section
      10.15 Transactions
      with Affiliates.
      The Borrower will not, and will not permit any Affiliate to, enter into any
      transaction, including, without limitation, any purchase, sale, lease or
      exchange of Property or the rendering of any service, with any Affiliate (other
      than the Guarantors and Wholly-Owned Subsidiaries of the Borrower) unless such
      transactions are otherwise permitted under this Agreement (including, without
      limitation, Section
      10.05),
      in the
      ordinary course of business of the Borrower and are upon fair and reasonable
      terms no less favorable to it than it would obtain in a comparable arm’s length
      transaction with a Person not an Affiliate.

     

    Section
      10.16 Capital
      Expenditures.
      Except (a) as provided for in the Development Plan, (b) as permitted by
Section
      6.03
      or (c)
      as expressly approved in writing by the Lenders the Borrower will not, and
      will
      not permit any of its Affiliates to, make any Capital Expenditures or incur
      costs associated with the exploration and development of Borrower’s and its
      Affiliates’ Oil and Gas Properties (excluding normal lease operating expenses)
      except for Capital Expenditures together with all other costs totaling $50,000
      or less in the aggregate in any twelve (12) consecutive month
      period.

     

    
      
        
        

      

      
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    Section
      10.17 Material
      Agreements.
      The Borrower will not, and will not permit any Affiliate to, enter into or
      amend
      or otherwise modify any Material Agreement or any other contract or agreement
      that involves an individual commitment from such Person of more than $50,000
      in
      the aggregate in any twelve (12) month period (except for such contracts and
      agreements that relate to the projects contemplated in the Development Plan,
      with all such new or modified Material Agreements related to projects
      contemplated in the Development Plan to be in form and substance reasonably
      satisfactory to the Administrative Agent).

     

    Section
      10.18 Affiliates.
      The Borrower will not, and will not permit any Affiliate to, create or acquire
      any additional Affiliate unless the Borrower gives written notice to the
      Administrative Agent of such creation or acquisition and complies with
Section
      9.14(b).
      The
      Borrower shall not, and shall not permit any Affiliate to, sell, assign or
      otherwise dispose of any Equity Interests in any Affiliate. Neither the Borrower
      nor any Affiliate shall have any Affiliates that are organized under laws other
      than those of the United States of America or any state thereof or the District
      of Columbia.

     

    Section
      10.19 Negative
      Pledge Agreements; Dividend Restrictions.
      The Borrower will not, and will not permit any Affiliate to, create, incur,
      assume or suffer to exist any contract, agreement or understanding (other than
      this Agreement and the Security Instruments) that in any way prohibits or
      restricts the granting, conveying, creation or imposition of any Lien on any
      of
      its Collateral in favor of the Administrative Agent and the Lenders or restricts
      any Affiliate from paying dividends or making distributions to the Borrower
      or
      any Guarantor, or which requires the consent of or notice to other Persons
      in
      connection therewith.

     

    Section
      10.20 Gas
      Imbalances, Take-or-Pay or Other Prepayments.
      The Borrower use its best efforts to prevent gas imbalances, take-or-pay or
      other prepayments with respect to the Oil and Gas Properties of the Borrower
      or
      any Affiliate that would require the Borrower or such Affiliate to deliver
      Hydrocarbons at some future time without then or thereafter receiving full
      payment therefore to exceed 10 mmcf of
      gas
      (on an mmcf equivalent basis) in the aggregate.

     

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

     

    
      
        
        

      

      
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    Section
      10.22 Certain
      Activities.
      The Borrower shall not, and shall not permit any Affiliate to, without
      the
      written consent of each Lender, (a)
      take any
      action not in the ordinary course of the business of the Borrower (unless such
      action could not reasonably be expected to have a Material Adverse Effect),
      (b)
      file or
      settle any litigation or arbitral proceedings, or release claim, for amount
      in
      excess of $50,000 in the aggregate, (c)
      either
      singly or jointly, directly or indirectly, commence, join any other Person
      in
      commencing, or authorize a trustee or other Person acting on its behalf or
      on
      behalf of others to commence, any voluntary bankruptcy, reorganization,
      arrangement, insolvency, liquidation, or receivership under the laws of the
      United States or any state thereof, or (d)
      make a
      general assignment for the benefit of its creditors.

     

    Section
      10.23 Net
      Sales.
      The Borrower shall not permit the net sales volume of Hydrocarbons from the
      Borrower’s and its Affiliates’ Oil and Gas Properties for the periods indicated
      on Schedule
      10.23
      to be
      less than the amount for such period as set forth in Schedule
      10.23.
      The
      Borrower will provide the Administrative Agent with evidence that the preceding
      is being satisfied within 30 days after the end of each quarter.

     

    Section
      10.24 G&A
      Costs.
      Except for the General and Administrative Costs provided for in Section
      6.01(b)(ix),
      without
      the prior consent of the Lenders the Borrower shall not incur and shall not
      permit any Affiliate to incur any General and Administrative Costs or from
      amounts distributed to Borrower monthly after the Payments required by
Section
      3.01
      have
      been made. 

     

    Section
      10.25 Press
      Release.
      Without the prior consent of the Lenders, such consent not to be unreasonably
      withheld, the Borrower shall not issue any press release or make any public
      announcement of the this Agreement or the credit facility being provided in
      connection therewith.

     

    ARTICLE
      XI

    Events
      of Default; Remedies

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (d) the
      Borrower or any Affiliate shall fail to observe or perform any covenant,
      condition or agreement contained in Section
      9.01(j),
      Section
      9.01(m),
      Section
      9.02,
      Section
      9.03,
      or in
ARTICLE
      X.

     

    (e) the
      Borrower or any of its Affiliates shall fail to observe or perform any covenant,
      condition or agreement contained in this Agreement (other than those specified
      in Section
      11.01(a),
      Section
      11.01(b)
      or
Section
      11.01(d))
      or any
      other Loan Document, and such failure shall continue unremedied for a period
      of
      twenty (20) days after the earlier to occur of (A) notice thereof from the
      Administrative Agent to the Borrower (which notice will be given at the request
      of any Lender) or (B) a Responsible Officer of the Borrower or such
      Affiliate otherwise becoming aware of such default; provided,
      however,
      with
      respect to a default as a result of a breach of Section
      10.01(d),
      if such
      default is a result of Arranger significantly reducing the pricing for
      Hydrocarbons in connection with a Reserve Report from the pricing it had used
      in
      the immediately preceding Reserve Report, Borrower shall have an additional
      ten
      (10) day period in which to cure such default.

     

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

     

    (g) any
      event
      or condition occurs that results in any Material Indebtedness becoming due
      prior
      to its scheduled maturity or that enables or permits (with or without the giving
      of notice, the lapse of time or both) the holder or holders of any Material
      Indebtedness or any trustee or agent on its or their behalf to cause any
      Material Indebtedness to become due, or to require the Redemption thereof or
      any
      offer to Redeem to be made in respect thereof, prior to its scheduled maturity
      or any event or condition requires the Borrower or any Affiliate to make an
      offer in respect thereof.

     

    (h) an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed seeking (i)
      liquidation, reorganization or other relief in respect of the Borrower or any
      of
      its Affiliates or its debts, or of a substantial part of its assets, under
      any
      Federal, state or foreign bankruptcy, insolvency, receivership or similar law
      now or hereafter in effect or (ii)
      the
      appointment of a receiver, trustee, custodian, sequestrator, conservator or
      similar official for the Borrower or any of its Affiliates or for a substantial
      part of its assets, and, in any such case, such proceeding or petition shall
      continue undismissed for thirty (30) days or an order or decree approving or
      ordering any of the foregoing shall be entered.

     

    
      
        
        

      

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

     

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

     

    (k) one
      or
      more judgments for the payment of money in an aggregate amount in excess of
      $100,000 shall
      be
      rendered against the Borrower, any Affiliate or any combination thereof and
      the
      same shall remain undischarged for a period of thirty (30) consecutive days
      during which execution shall not be effectively stayed, or any action shall
      be
      legally taken by a judgment creditor to attach or levy upon any assets of the
      Borrower or any Affiliate to enforce any such judgment.

     

    (l) the
      Loan
      Documents after delivery thereof shall for any reason, except to the extent
      permitted by the terms thereof, cease to be in full force and effect and valid,
      binding and enforceable in accordance with their terms against the Borrower
      or a
      Guarantor party thereto or shall be repudiated by any of them, or cease to
      create a valid and perfected Lien of the priority required thereby on any of
      the
      collateral purported to be covered thereby, except to the extent permitted
      by
      the terms of this Agreement, or the Borrower or any Affiliate or any of their
      Affiliates shall so state in writing.

     

    (m) an
      ERISA
      Event shall have occurred that, in the opinion of the Lenders, when taken
      together with all other ERISA Events that have occurred, could reasonably be
      expected to result in a Material Adverse Effect.

     

    (n) a
      Change
      in Control has occurred.

     

    Section
      11.02 Remedies.

     

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

     

    
      
        
        

      

      
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    (b) In
      the
      case of the occurrence and continuance of an Event of Default, the
      Administrative Agent is authorized to complete the Letters-in-Lieu and deliver
      same, and the Administrative Agent and the Lenders will have all other rights
      and remedies available at law and equity.

     

    (c) All
      proceeds realized from the liquidation or other disposition of collateral or
      otherwise received after maturity of the Notes, whether by acceleration or
      otherwise, shall be applied: first,
      to
      reimbursement of expenses and indemnities provided for in this Agreement and
      the
      Security Instruments; second,
      to
      accrued interest on the Notes; third,
      to
      fees; fourth,
      pro
      rata to principal outstanding on the Notes and Indebtedness referred to in
      clause (b) of the definition of “Indebtedness” owing to a Lender or an Affiliate
      of a Lender; and any excess shall be paid to the Borrower or as otherwise
      required by any Governmental Requirement. 

     

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

     

    ARTICLE
      XII

    The
      Administrative Agent

     

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

     

    
      
        
        

      

      
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    Section
      12.02 Duties
      and Obligations of Administrative Agent.
      The Administrative Agent shall not have any duties or obligations except those
      expressly set forth in the Loan Documents. Without limiting the generality
      of
      the foregoing, (a)
      the
      Administrative Agent shall not be subject to any fiduciary or other implied
      duties, regardless of whether a Default has occurred and is continuing,
(b)
      the
      Administrative Agent shall not have any duty to take any discretionary action
      or
      exercise any discretionary powers, except as provided in Section
      12.03,
      and
(c)
      except
      as expressly set forth herein, the Administrative Agent shall not have any
      duty
      to disclose, and shall not be liable for the failure to disclose, any
      information relating to the Borrower or any of its Affiliates that is
      communicated to or obtained by the entity serving as Administrative Agent or
      any
      of its Affiliates in any capacity. The Administrative Agent shall be deemed
      not
      to have knowledge of any Default unless and until written notice thereof is
      given to the Administrative Agent by the Borrower or a Lender, and shall not
      be
      responsible for or have any duty to ascertain or inquire into (i)
      any
      statement, warranty or representation made in or in connection with this
      Agreement or any other Loan Document, (ii)
      the
      contents of any certificate, report or other document delivered hereunder or
      under any other Loan Document or in connection herewith or therewith,
(iii)
      the
      performance or observance of any of the covenants, agreements or other terms
      or
      conditions set forth herein or in any other Loan Document, (iv)
      the
      validity, enforceability, effectiveness or genuineness of this Agreement, any
      other Loan Document or any other agreement, instrument or document, (v)
      the
      satisfaction of any condition set forth in ARTICLE
      VII
      or
      elsewhere herein, other than to confirm receipt of items expressly required
      to
      be delivered to the Administrative Agent or as to those conditions precedent
      expressly required to be to the Administrative Agent’s satisfaction,
(vi)
      the
      existence, value, perfection or priority of any collateral security or the
      financial or other condition of the Borrower and its Affiliates or any other
      obligor or guarantor, or (vii)
      any
      failure by the Borrower or any other Person (other than itself) to perform
      any
      of its obligations hereunder or under any other Loan Document or the performance
      or observance of any covenants, agreements or other terms or conditions set
      forth herein or therein. 

     

    Section
      12.03 Action
      by Administrative Agent.
      The Administrative Agent shall not have any duty to take any discretionary
      action or exercise any discretionary powers, except discretionary rights and
      powers expressly contemplated hereby that the Administrative Agent is required
      to exercise in writing as directed by the Lenders and in all cases the
      Administrative Agent shall be fully justified in failing or refusing to act
      hereunder or under any other Loan Documents unless it shall (a)
      receive
      written instructions from the Lenders specifying the action to be taken and
      (b)
      be
      indemnified to its satisfaction by the Lenders against any and all liability
      and
      expenses which may be incurred by it by reason of taking or continuing to take
      any such action. The instructions as aforesaid and any action taken or failure
      to act pursuant thereto by the Administrative Agent shall be binding on all
      of
      the Lenders. If a Default has occurred and is continuing, then the
      Administrative Agent shall take such action with respect to such Default as
      shall be directed by the Lenders in the written instructions (with indemnities)
      described in this Section
      12.03,
      provided
      that,
      unless and until the Administrative Agent shall have received such directions,
      the Administrative Agent may (but shall not be obligated to) take such action,
      or refrain from taking such action, with respect to such Default as it shall
      deem advisable in the best interests of the Lenders. In no event, however,
      shall
      the Administrative Agent be required to take any action which exposes the
      Administrative Agent to personal liability or which is contrary to this
      Agreement, the Loan Documents or applicable law. The Administrative Agent shall
      not be liable for any action taken or not taken by it with the consent or at
      the
      request of the Lenders, and otherwise the Administrative Agent shall not be
      liable for any action taken or not taken by it hereunder or under any other
      Loan
      Document or under any other document or instrument referred to or provided
      for
      herein or therein or in connection herewith or therewith INCLUDING ITS OWN
      ORDINARY NEGLIGENCE, except for its own gross negligence or willful
      misconduct.

     

    
      
        
        

      

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

     

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

     

    Section
      12.06 Resignation
      or Removal of Administrative Agent.
      Subject to the appointment and acceptance of a successor Administrative Agent
      as
      provided in this Section
      12.06,
      the
      Administrative Agent may resign at any time by notifying the Lenders and the
      Borrower, and the Administrative Agent may be removed at any time with or
      without cause by all of the Lenders. Upon any such resignation or removal,
      the
      Lenders shall have the right, in consultation with the Borrower, to appoint
      a
      successor. If no successor shall have been so appointed by the Lenders and
      shall
      have accepted such appointment within thirty (30) days after the retiring
      Administrative Agent gives notice of its resignation or removal of the retiring
      Administrative Agent, then the retiring Administrative Agent may, on behalf
      of
      the Lenders, appoint a successor Administrative Agent. Upon the acceptance
      of
      its appointment as the Administrative Agent hereunder by a successor, such
      successor shall succeed to and become vested with all the rights, powers,
      privileges and duties of the retiring Administrative Agent, and the retiring
      Administrative Agent shall be discharged from its duties and obligations
      hereunder. The fees payable by the Borrower to a successor Administrative Agent
      shall be the same as those payable to its predecessor unless otherwise agreed
      between the Borrower and such successor. After the Administrative Agent’s
      resignation hereunder, the provisions of this ARTICLE
      XII
      and
Section
      13.03
      shall
      continue in effect for the benefit of such retiring Administrative Agent, its
      sub-agents and their respective Related Parties in respect of any actions taken
      or omitted to be taken by any of them while it was acting as Administrative
      Agent.

     

    
      
        
        

      

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

     

    Section
      12.08 No
      Reliance.
      Each Lender acknowledges that it has, independently and without reliance upon
      the Administrative Agent or any other Lender and based on such documents and
      information as it has deemed appropriate, made its own credit analysis and
      decision to enter into this Agreement and each other Loan Document to which
      it
      is a party. Each Lender also acknowledges that it will, independently and
      without reliance upon the Administrative Agent or any other Lender and based
      on
      such documents and information as it shall from time to time deem appropriate,
      continue to make its own decisions in taking or not taking action under or
      based
      upon this Agreement, any other Loan Document, any related agreement or any
      document furnished hereunder or thereunder. The Administrative Agent shall
      not
      be required to keep itself informed as to the performance or observance by
      the
      Borrower or any of its Affiliates of this Agreement, the Loan Documents or
      any
      other document referred to or provided for herein or to inspect the Properties
      or books of the Borrower or its Affiliates. Except for notices, reports and
      other documents and information expressly required to be furnished to the
      Lenders by the Administrative Agent hereunder, neither the Administrative Agent
      nor the Arranger shall have any duty or responsibility to provide any Lender
      with any credit or other information concerning the affairs, financial condition
      or business of the Borrower (or any of its Affiliates) which may come into
      the
      possession of such Agent or any of its Affiliates. In this regard, each Lender
      acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as
      special counsel to the Administrative Agent only, except to the extent otherwise
      expressly stated in any legal opinion or any Loan Document. Each other party
      hereto will consult with its own legal counsel to the extent that it deems
      necessary in connection with the Loan Documents and the matters contemplated
      therein.

     

    Section
      12.09 Authority
      of Administrative Agent to Release Collateral and Liens.
      Each Lender hereby authorizes the Administrative Agent to release any collateral
      that is permitted to be sold or released pursuant to the terms of the Loan
      Documents. Each Lender hereby authorizes the Administrative Agent to execute
      and
      deliver to the Borrower, at the Borrower’s sole cost and expense, any and all
      releases of Liens, termination statements, assignments or other documents
      reasonably requested by the Borrower in connection with any sale or other
      disposition of Property to the extent such sale or other disposition is
      permitted by the terms of Section
      10.13
      or is
      otherwise authorized by the terms of the Loan Documents.

     

    
      
        
        

      

      
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    ARTICLE
      XIII

     

    Miscellaneous

     

    Section
      13.01 Notices.

     

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

     

    (i) if
      to the
      Borrower, to it at 2801 Network Blvd., Suite 810, Frisco, Texas 75034,
      Attention: Daniel F. Collins (Telephone No. 972-818-1100);

     

    (ii) if
      to the
      Administrative Agent, to it at D. B. Zwirn Special Opportunities Fund, L.P.,
      745
      5th Avenue, 18th Floor, New York, NY 10151, Attention: Todd Dittman (Telecopy
      No. (713) 652-0557);

     

    (iii) if
      to the
      Arranger, to it at Petrobridge
      Investment Management LLC, 1600 Smith Street, Suite 4250, Houston, TX
      77002,
      Attention: Mike
      Keener
      (Telecopy No. (713) 490-3867);

     

    (iv) if
      to any
      other Lender, to it at its address (or telecopy number) set forth on its
      applicable signature page.

     

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

     

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

     

    Section
      13.02 Waivers;
      Amendments. 

     

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

     

    
      
        
        

      

      
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    (b) Neither
      this Agreement nor any provision hereof nor any Security Instrument nor any
      provision thereof may be waived, amended or modified except pursuant to an
      agreement or agreements in writing entered into by the Borrower and the Lenders
      or by the Borrower and the Administrative Agent with the consent of all of
      the
      Lenders.

     

    Section
      13.03 Expenses,
      Indemnity; Damage Waiver.

     

    (a) The
      Borrower shall pay (i)
      all
      reasonable out-of-pocket expenses incurred by the Administrative Agent and
      its
      Affiliates, including, without limitation, the reasonable fees, charges and
      disbursements of counsel and other outside consultants for the Administrative
      Agent, the reasonable travel, photocopy, mailing, courier, telephone and other
      similar expenses, and the cost of environmental audits and surveys and
      appraisals, in connection with the ongoing enforcement and performance of the
      credit facilities provided for herein as Administrative Agent deems appropriate,
      the preparation, negotiation, execution, delivery and administration (both
      before and after the execution hereof and including advice of counsel to the
      Administrative Agent as to the rights and duties of the Administrative Agent
      and
      the Lenders with respect thereto) of this Agreement and the other Loan Documents
      and any amendments, modifications or waivers of or consents related to the
      provisions hereof or thereof (whether or not the transactions contemplated
      hereby or thereby shall be consummated), (ii)
      all
      costs, expenses, Taxes, assessments and other charges incurred by the
      Administrative Agent or any Lender in connection with any filing, registration,
      recording or perfection of any security interest contemplated by this Agreement
      or any Security Instrument or any other document referred to therein,
(iii)
      all
      reasonable out-of-pocket expenses incurred by the Administrative Agent or any
      Lender, including the reasonable fees, charges and disbursements of any counsel
      for any the Administrative Agent or any Lender, in connection with the
      enforcement or protection of its rights in connection with this Agreement or
      any
      other Loan Document, including its rights under this Section
      13.03,
      including, without limitation, all such out-of-pocket expenses incurred during
      any workout, restructuring or negotiations in respect of such Loans and any
      appraisal costs incurred by the Administrative Agent or the
      Lenders.

     

    (b) THE
      BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER, AND EACH
      LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
      BEING CALLED AN “INDEMNITEE”)
      AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
      DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND
      DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST
      ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF
(i)
      THE
      EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
      AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY
      THE
      PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
      OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
      CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii)
      THE
      FAILURE OF THE BORROWER OR ANY AFFILIATE TO COMPLY WITH THE TERMS OF ANY LOAN
      DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT,
(iii)
      ANY
      INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT
      OF
      THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
      INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH,
      (iv)
      ANY LOAN
      OR THE USE OF THE PROCEEDS THEREFROM, (v)
      ANY
      OTHER ASPECT OF THE LOAN DOCUMENTS, (vi)
      THE
      OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS AFFILIATES BY THE BORROWER
      AND ITS AFFILIATES, (vii)
      ANY
      ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
      PURSUANT TO THE SECURITY INSTRUMENTS, (viii)
      ANY
      ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY AFFILIATE OR ANY OF THEIR
      PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE,
      RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL
      OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES
      ON
      ANY OF THEIR PROPERTIES, (ix)
      THE
      BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY AFFILIATE WITH ANY ENVIRONMENTAL
      LAW APPLICABLE TO THE BORROWER OR ANY AFFILIATE, (x)
      THE PAST
      OWNERSHIP BY THE BORROWER OR ANY AFFILIATE OF ANY OF THEIR PROPERTIES OR PAST
      ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE
      AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi)
      THE
      PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED
      RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF
      OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY
      OF
      THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY AFFILIATE OR ANY ACTUAL
      OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY
      OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS AFFILIATES, (xii)
      ANY
      ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
      AFFILIATES, OR (xiii)
      ANY
      OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
      DOCUMENTS, OR (xiv)
      ANY
      ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING
      TO
      ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
      REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
      SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
      NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
      WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
      TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS
      OF
      ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
      FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED
      THAT
      SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
      THAT
      SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED
      BY
      A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE
      RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
      INDEMNITEE.

     

    
      
        
        

      

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

     

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

     

    (e) All
      amounts due under this Section
      13.03
      shall be
      payable promptly after written demand therefor.

     

    Section
      13.04 Successors
      and Assigns.

     

    (a) The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the parties hereto and their respective successors and assigns permitted hereby,
      except that (i) the Borrower may not assign or otherwise transfer any of its
      rights or obligations hereunder without the prior written consent of each Lender
      (and any attempted assignment or transfer by the Borrower without such consent
      shall be null and void) and (ii) no Lender may assign or otherwise transfer
      its
      rights or obligations hereunder except in accordance with this Section
      13.04.
      Nothing
      in this Agreement, expressed or implied, shall be construed to confer upon
      any
      Person (other than the parties hereto, their respective successors and assigns
      permitted hereby, Participants (to the extent provided in Section
      13.04(c))
      and, to
      the extent expressly contemplated hereby, the Related Parties of each of the
      Administrative Agent and the Lenders) any legal or equitable right, remedy
      or
      claim under or by reason of this Agreement.

     

    (b) (i)
      Subject
      to the conditions set forth in Section
      13.04(b)(ii),
      any
      Lender may assign to one or more assignees all or a portion of its rights and
      obligations under this Agreement (including all or a portion of its Commitment
      and the Loans at the time owing to it) without the prior written consent of
      the
      Borrower.

     

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

     

    
      
        
        

      

      
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    (i) except
      in
      the case of an assignment to a Lender or an Affiliate of a Lender or an
      assignment of the entire remaining amount of the assigning Lender’s Commitment,
      the amount of the Commitment of the assigning Lender subject to each such
      assignment (determined as of the date the Assignment and Assumption with respect
      to such assignment is delivered to the Administrative Agent) shall not be less
      than $100,000 unless each of the Borrower and the Administrative Agent otherwise
      consent, provided
      that no
      such consent of the Borrower shall be required if an Event of Default has
      occurred and is continuing;

     

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

     

    (iii) the
      parties to each assignment shall execute and deliver to the Administrative
      Agent
      an Assignment and Assumption, together with a processing and recordation fee
      of
      $10,000; and

     

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

     

    (iii) Subject
      to Section
      13.04(b)(iv)
      and the
      acceptance and recording thereof, from and after the effective date specified
      in
      each Assignment and Assumption the assignee thereunder shall be a party hereto
      and, to the extent of the interest assigned by such Assignment and Assumption,
      have the rights and obligations of a Lender under this Agreement, and the
      assigning Lender thereunder shall, to the extent of the interest assigned by
      such Assignment and Assumption, be released from its obligations under this
      Agreement (and, in the case of an Assignment and Assumption covering all of
      the
      assigning Lender’s rights and obligations under this Agreement, such Lender
      shall cease to be a party hereto but shall continue to be entitled to the
      benefits of Section
      5.01,
      Section
      5.02
      and
Section
      13.03).
      Any
      assignment or transfer by a Lender of rights or obligations under this Agreement
      that does not comply with this Section
      13.04
      shall be
      treated for purposes of this Agreement as a sale by such Lender of a
      participation in such rights and obligations in accordance with Section
      13.04(c).

     

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

     

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

     

    
      
        
        

      

      
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    (c) (i) Any
      Lender may, without the consent of the Borrower or the Administrative Agent,
      sell participations to one or more banks or other entities (a “Participant”)
      in all
      or a portion of such Lender’s rights and obligations under this Agreement
      (including all or a portion of its Commitment and the Loans owing to it);
provided
      that
(i) such
      Lender’s obligations under this Agreement shall remain unchanged, (ii) such
      Lender shall remain solely responsible to the other parties hereto for the
      performance of such obligations and (iii) the
      Borrower, the Administrative Agent, and the other Lenders shall continue to
      deal
      solely and directly with such Lender in connection with such Lender’s rights and
      obligations under this Agreement. Any agreement or instrument pursuant to which
      a Lender sells such a participation shall provide that such Lender shall retain
      the sole right to enforce this Agreement and to approve any amendment,
      modification or waiver of any provision of this Agreement; provided
      that
      such agreement or instrument may provide that such Lender will not, without
      the
      consent of the Participant, agree to any amendment, modification or waiver
      described in the proviso to Section
      13.02
      that
      affects such Participant. In addition such agreement must provide that the
      Participant be bound by the provisions of Section
      13.03.
      Subject
      to Section
      13.04(c)(ii),
      the
      Borrower agrees that each Participant shall be entitled to the benefits of
      Section
      5.01
      and
Section
      5.02
      to the
      same extent as if it were a Lender and had acquired its interest by assignment
      pursuant to Section
      13.04(b).
      To the
      extent permitted by law, each Participant also shall be entitled to the benefits
      of Section
      13.08
      as
      though it were a Lender, provided
      such
      Participant agrees to be subject to Section
      4.01(c)
      as
      though it were a Lender.

     

         
      (ii) A
      Participant shall not be entitled to receive any greater payment under
Section
      5.01
      or
Section
      5.02
      than the
      applicable Lender would have been entitled to receive with respect to the
      participation sold to such Participant, unless the sale of the participation
      to
      such Participant is made with the Borrower’s prior written consent.

     

    (d) Any
      Lender may at any time pledge or assign a security interest in all or any
      portion of its rights under this Agreement to secure obligations of such Lender,
      including any pledge or assignment to secure obligations to a Federal Reserve
      Bank, and this Section
      13.04(d)
      shall
      not apply to any such pledge or assignment of a security interest; provided
      that no
      such pledge or assignment of a security interest shall release a Lender from
      any
      of its obligations hereunder or substitute any such pledgee or assignee for
      such
      Lender as a party hereto.

     

    Section
      13.05 Survival;
      Revival; Reinstatement.

     

    (a) All
      covenants, agreements, representations and warranties made by the Borrower
      herein and in the certificates or other instruments delivered in connection
      with
      or pursuant to this Agreement or any other Loan Document shall be considered
      to
      have been relied upon by the other parties hereto and shall survive the
      execution and delivery of this Agreement and the making of any Loans, regardless
      of any investigation made by any such other party or on its behalf and
      notwithstanding that the Administrative Agent or any Lender may have had notice
      or knowledge of any Default or incorrect representation or warranty at the
      time
      any credit is extended hereunder, and shall continue in full force and effect
      as
      long as the principal of or any accrued interest on any Loan or any fee or
      any
      other amount payable under this Agreement is outstanding and unpaid and so
      long
      as the Commitments have not expired or terminated. The provisions of
Section
      5.01,
      Section
      5.02
      and
Section
      13.03
      and
ARTICLE
      XII
      shall
      survive and remain in full force and effect regardless of the consummation
      of
      the transactions contemplated hereby, the repayment of the Loans, and the
      Commitments or the termination of this Agreement, any other Loan Document or
      any
      provision hereof or thereof.

     

    
      
        
        

      

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

     

    Section
      13.06 Counterparts;
      Integration; Effectiveness.

     

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

     

    (b) This
      Agreement, the other Loan Documents and any separate letter agreements with
      respect to fees payable to the Administrative Agent constitute the entire
      contract among the parties relating to the subject matter hereof and thereof
      and
      supersede any and all previous agreements and understandings, oral or written,
      relating to the subject matter hereof and thereof. This Agreement and the other
      Loan Documents represent the final agreement among the parties hereto and
      thereto and may not be contradicted by evidence of prior, contemporaneous or
      subsequent oral agreements of the parties. There are no unwritten oral
      agreements between the parties. 

     

    (c) Except
      as
      provided in Section
      7.01,
      this
      Agreement shall become effective when it shall have been executed by the
      Administrative Agent and when the Administrative Agent shall have received
      counterparts hereof which, when taken together, bear the signatures of each
      of
      the other parties hereto, and thereafter shall be binding upon and inure to
      the
      benefit of the parties hereto and their respective successors and assigns.
      Delivery of an executed counterpart of a signature page of this Agreement by
      telecopy shall be effective as delivery of a manually executed counterpart
      of
      this Agreement.

     

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

     

    
      
        
        

      

      
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    Section
      13.08 Right
      of Setoff.
      If an Event of Default shall have occurred and be continuing, each Lender and
      each of its Affiliates is hereby authorized at any time and from time to time,
      to the fullest extent permitted by law, to set off and apply any and all
      deposits (general or special, time or demand, provisional or final) at any
      time
      held and other obligations (of whatsoever kind, including, without limitations
      obligations under Swap Agreements) at any time owing by such Lender or Affiliate
      to or for the credit or the account of the Borrower or any Affiliate against
      any
      of and all the obligations of the Borrower or any Affiliate owed to such Lender
      now or hereafter existing under this Agreement or any other Loan Document,
      irrespective of whether or not such Lender shall have made any demand under
      this
      Agreement or any other Loan Document and although such obligations may be
      unmatured. The rights of each Lender under this Section
      13.08
      are in
      addition to other rights and remedies (including other rights of setoff) which
      such Lender or its Affiliates may have.

     

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

     

    (a) THIS
      AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
      THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT UNITED STATES
      FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE OR
      TAKE
      INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS
      LOCATED. 

     

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

     

    (c) EACH
      PARTY HEREBY (i)
      IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
      LAW,
      TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
      OR
      ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii)
      IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
      IT
      MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
      PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
      ACTUAL DAMAGES; (iii)
      CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR
      ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
      PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
      WAIVERS, AND (iv)
      ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
      DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
      THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION
13.09.

     

    
      
        
        

      

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

     

    Section
      13.11 Confidentiality.
      Each of the Administrative Agent and the Lender agrees to maintain the
      confidentiality of the Information (as defined below), except that Information
      may be disclosed (a)
      to its
      and its Affiliates’ directors, officers, employees and agents, including
      accountants, legal counsel and other advisors (it being understood that the
      Persons to whom such disclosure is made will be informed of the confidential
      nature of such Information and instructed to keep such Information
      confidential), (b)
      to the
      extent requested by any regulatory authority, (c)
      to the
      extent required by applicable laws or regulations or by any subpoena or similar
      legal process, (d)
      to any
      other party to this Agreement or any other Loan Document, (e)
      in
      connection with the exercise of any remedies hereunder or under any other Loan
      Document or any suit, action or proceeding relating to this Agreement or any
      other Loan Document or the enforcement of rights hereunder or thereunder,
(f)
      subject
      to an agreement containing provisions substantially the same as those of this
      Section
      13.11,
      to
(i)
      any
      assignee of or Participant in, or any prospective assignee of or Participant
      in,
      any of its rights or obligations under this Agreement or (ii)
      any
      actual or prospective counterparty (or its advisors) to any Swap Agreement
      relating to the Borrower and its obligations, (g)
      with the
      consent of the Borrower or (h)
      to the
      extent such Information (i)
      becomes
      publicly available other than as a result of a breach of this Section
      13.11
      or
(ii)
      becomes
      available to the Administrative Agent or any Lender on a non-confidential basis
      from a source other than the Borrower. For the purposes of this Section
      13.11,
      “Information”
means
      all information received from the Borrower or any Affiliate relating to the
      Borrower or any Affiliate and their businesses, other than any such information
      that is available to the Administrative Agent or any Lender on a
      non-confidential basis prior to disclosure by the Borrower or a Affiliate;
      provided
      that, in
      the case of information received from the Borrower or any Affiliate after the
      date hereof, such information is clearly identified at the time of delivery
      as
      confidential. Any Person required to maintain the confidentiality of Information
      as provided in this Section
      13.11
      shall be
      considered to have complied with its obligation to do so if such Person has
      exercised the same degree of care to maintain the confidentiality of such
      Information as such Person would accord to its own confidential information.
      

     

    Section
      13.12 Interest
      Rate
      Limitation.
      It is the intention of the parties hereto that each Lender shall conform
      strictly to usury laws applicable to it. Accordingly, if the transactions
      contemplated hereby would be usurious as to any Lender under laws applicable
      to
      it (including the laws of the United States of America and the States of New
      York, or Texas or any other jurisdiction whose laws may be mandatorily
      applicable to such Lender notwithstanding the other provisions of this
      Agreement), then, in that event, notwithstanding anything to the contrary in
      any
      of the Loan Documents or any agreement entered into in connection with or as
      security for the Notes, it is agreed as follows: (i)
      the
      aggregate of all consideration which constitutes interest under law applicable
      to any Lender that is contracted for, taken, reserved, charged or received
      by
      such Lender under any of the Loan Documents or agreements or otherwise in
      connection with the Notes shall under no circumstances exceed the maximum amount
      allowed by such applicable law, and any excess shall be canceled automatically
      and if theretofore paid shall be credited by such Lender on the principal amount
      of the Indebtedness (or, to the extent that the principal amount of the
      Indebtedness shall have been or would thereby be paid in full, refunded by
      such
      Lender to the Borrower); and (ii)
      in the
      event that the maturity of the Notes is accelerated by reason of an election
      of
      the holder thereof resulting from any Event of Default under this Agreement
      or
      otherwise, or in the event of any required or permitted prepayment, then such
      consideration that constitutes interest under law applicable to any Lender
      may
      never include more than the maximum amount allowed by such applicable law,
      and
      excess interest, if any, provided for in this Agreement or otherwise shall
      be
      canceled automatically by such Lender as of the date of such acceleration or
      prepayment and, if theretofore paid, shall be credited by such Lender on the
      principal amount of the Indebtedness (or, to the extent that the principal
      amount of the Indebtedness shall have been or would thereby be paid in full,
      refunded by such Lender to the Borrower). All sums paid or agreed to be paid
      to
      any Lender for the use, forbearance or detention of sums due hereunder shall,
      to
      the extent permitted by law applicable to such Lender, be amortized, prorated,
      allocated and spread throughout the stated term of the Loans evidenced by the
      Notes until payment in full so that the rate or amount of interest on account
      of
      any Loans hereunder does not exceed the maximum amount allowed by such
      applicable law. If at any time and from time to time (i)
      the
      amount of interest payable to any Lender on any date shall be computed at the
      Highest Lawful Rate applicable to such Lender pursuant to this Section
      13.12
      and
(ii)
      in
      respect of any subsequent interest computation period the amount of interest
      otherwise payable to such Lender would be less than the amount of interest
      payable to such Lender computed at the Highest Lawful Rate applicable to such
      Lender, then the amount of interest payable to such Lender in respect of such
      subsequent interest computation period shall continue to be computed at the
      Highest Lawful Rate applicable to such Lender until the total amount of interest
      payable to such Lender shall equal the total amount of interest which would
      have
      been payable to such Lender if the total amount of interest had been computed
      without giving effect to this Section
      13.12.
      

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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    Section
      13.14 Collateral
      Matters; Swap Agreements.
      The benefit of the Security Instruments and of the provisions of this Agreement
      relating to any collateral securing the Indebtedness shall also extend to and
      be
      available to those Lenders or their Affiliates which are counterparties to
      any
      Swap Agreement with the Borrower or any of its Affiliates on a pro
      rata
      basis in
      respect of any obligations of the Borrower or any of its Affiliates which arise
      under any such Swap Agreement while such Person or its Affiliate is a Lender,
      but only while such Person or its Affiliate is a Lender, including any Swap
      Agreements between such Persons in existence prior to the date hereof. No Lender
      or any Affiliate of a Lender shall have any voting rights under any Loan
      Document as a result of the existence of obligations owed to it under any such
      Swap Agreements.

     

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

     

    Section
      13.16 Securitization.
      The Borrower hereby acknowledges that the Lenders and their Affiliates may
      sell
      or securitize the Loans (a “Securitization”)
      through the pledge of the Loans as collateral security for loans to the Lenders
      or their Affiliates or through the sale of the Loans or the issuance of direct
      or indirect interests in the Loans, which loans to the Lenders or their
      Affiliates or direct or indirect interests will be rated by Moody’s, S&P or
      one or more other rating agencies (the “Rating
      Agencies”).
      The
      Borrower shall cooperate with the Lenders and their Affiliates to effect the
      Securitization including, without limitation, by (a) amending this Agreement
      and
      the other Loan Documents, and executing such additional documents, as reasonably
      requested by the Lenders in connection with the Securitization, provided
      that (i)
      any such amendment or additional documentation does not impose material
      additional costs on the Borrower and (ii) any such amendment or additional
      documentation does not materially adversely affect the rights, or materially
      increase the obligations, of the Borrower under the Loan Documents or change
      or
      affect in a manner adverse to the Borrower the financial terms of the Loans,
      (b)
      providing such information as may be reasonably requested by the Lenders in
      connection with the rating of the Loans or the Securitization, and (c) providing
      in connection with any rating of the Loans a certificate (i) agreeing to
      indemnify the Lenders and their Affiliates, any of the Rating Agencies, or
      any
      party providing credit support or otherwise participating in the Securitization
      (collectively, the “Securitization
      Parties”)
      for
      any losses, claims, damages or liabilities (the “Liabilities”)
      to
      which the Lenders, their Affiliates or such Securitization Parties may become
      subject insofar as the Liabilities arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in any
      Loan
      Document or in any writing delivered by or on behalf of the Borrower or any
      Affiliate of the Borrower to the Lenders in connection with any Loan Document
      or
      arise out of or are based upon the omission or alleged omission to state therein
      a material fact required to be stated therein, or necessary in order to make
      the
      statements therein, in light of the circumstances under which they were made,
      not misleading, and such indemnity shall survive any transfer by the Lenders
      or
      their successors or assigns of the Loans and (ii) agreeing to reimburse the
      Lenders and their Affiliates for any legal or other expenses incurred by such
      Persons in connection with defending the Liabilities. 

     

    
      
        
        

      

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

     

    [SIGNATURES
      BEGIN NEXT PAGE]

     

    
      
        
        

      

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

     

    
      	 	 	 
	 BORROWER:	CROSSPOINT
              ENERGY HOLDINGS, LLC
	 
 	 
 	 
 
	 	By:  	/s/ Daniel
              F.
              Collins
	 	
              
Daniel
              F. Collins
	 	President

    

        

    

      [Signature
        Page to Credit Agreement]

        
          
            
            

          

          
            S-1

            
              

            

          

          
            
            

          

        

      

       

    

    
      	 	 	 
	 ADMINISTRATIVE
              AGENT:	D.
              B. ZWIRN SPECIAL OPPORTUNITIES  FUND,
              L.P.
	 
 	 
 	 
 
	 	
              By:

            	
              D.
                B. Zwirn Partners, LLC, 
                as
                  general partner

              

            
	 	 	 
	 	By:  	/s/ Mark
              K. Furstein
	 	 	
              

            
	 	Name:	 Mark K. Furstein
	 	Title:	 Chief Executive Officer 
	 	 
	 	 

    

     

    [Signature
      Page to Credit Agreement]

    
      
        
        

      

      
        S-2

        
          

        

      

      
        
        

      

    

    
      
        	 	 	 
	 LENDER:	DRAWBRIDGE
                SPECIAL OPPORTUNITIES FUND
                LP
	 
 	 
 	 
 
	 	
                By:

              	
                Drawbridge
                  Special Opportunities GP LLC, as general partner

              
	 	 	 
	 	By: 	 /s/ Perry A. Gruss
	 	 	
                

              
	 	Name:	 Perry A. Gruss
	 	Title: 	 Authorized Signatory
	 	 
	 	 

      

    

          

    
      	
            	 	 
	 	Address: 	 1251 Avenue of the Americas
	 	 	
               Suite
                1600

            
	 	 	 New York, New York  10020
	 	 	 Attention: John C. King, Chief Financial
              Officer
	 	 Telecopy: (212) 202-3685
	 

    

    

    [Signature
      Page to Credit Agreement]

    
      
        
        

      

      
        S-3

        
          

        

      

      
        
        

      

    

     

    

      
        
          	 	 	 
	 LENDER:	D.B.
                  ZWIRN SPECIAL OPPORTUNITIES FUND,
                  L.P.
	 
 	 
 	 
 
	 	
                  By:

                	
                  
                    D.
                      B. Zwirn Partners, LLC, 

                    as
                      general partner

                  

                
	 	 	 
	 	By: 	 /s/ Perry A. Gruss
	 	 	
                  

                
	 	Name:	 Perry A. Gruss
	 	Title: 	 Authorized Signatory
	 	 
	 

        

      

    

    

      
        	
              	 	 
	 	Address: 	 745 5th Avenue, 18th Floor
	 	 	 New
                York, New York 10151
	 	 	 Attention: Scott McMurtry
	 	 	 Telecopy:(646)
                720-9039
	 	 
	 

      

      

      [Signature
        Page to Credit
        Agreement]

    

    
      
        
        

      

      
        S-4INDEMNIFICATION
      AGREEMENT

     

         This
      Indemnification Agreement (the “Agreement”) is made and entered into by and
      among CrossPoint Energy, LLC, a limited liability company formed in Texas (the
      “Company”), Daniel F. Collins (“Collins”), Jeffery A. Krakos (“Krakos”), Rosa L.
      Collins (“R. Frazier”), and DeAnn C. Krakos (“D. Krakos”) (Collins, Krakos, R.
      Collins and D. Krakos are sometimes collectively referred to herein as the
      “Related Parties”).

     

    
      WITNESSETH:

    

     

         WHEREAS,
      Collins and Krakos are executive officers of the Company and the Related Parties
      own equity interests in the Company; and

     

         WHEREAS,
      Dallas Operating Company, a Texas corporation (“DOC”), is a subsidiary of the
      Company; and

     

         WHEREAS,
      one or more of the Related Parties (a) have guaranteed various and sundry
      obligations of the Company and DOC (collectively referred to herein as the
      “Corporate Obligations”); and (b) may guarantee future obligations of the
      Company and/or DOC in connection with the normal and customary operations of
      the
      Company (such future obligations are collectively referred to herein as the
      “Future Obligations”); and

     

         WHEREAS,
      the Company desires to indemnify and hold harmless the Related Parties, and
      each
      of them, in connection with both Corporate Obligations and the Future
      Obligations; and

     

         WHEREAS,
      the parties hereto desire to enter into this Agreement to document the
      intentions of the parties concerning certain issues and matters as herein set
      forth.

     

         NOW
      THEREFORE, for good and valuable consideration, the parties hereto contract
      and
      agree as follows: 

     

         1. By
      execution of this Agreement, the parties hereto acknowledge and agree to the
      facts set forth in the preamble to this Agreement.

     

         2. The
      Company shall and does hereby agree to indemnify and hold harmless each of
      the
      Related Parties, and the agents and representatives of each the Related Parties,
      from and against any and all of the following claims and liabilities: (a) the
      Corporate Obligations, (b) the Future Obligations, and (c) any and all other
      claims or legal proceedings that any third party may make or initiate against
      the Related Parties, or any one or more of them, in connection with the
      foregoing.

     

         3. In
      connection with the foregoing, the Related Parties agree to the following:
      (a)
      the Related Parties shall timely provide the Company with a written list of
      the
      Corporate Obligations, (b) the Related Parties agree that they shall not enter
      into any Future Obligations without the Board of Managers of the Company (i)
      being apprised in writing of the terms of the Future Obligation involved, or
      (ii) approving and ratifying the action of the Related Parties becoming
      obligated with respect to the Future Obligations involved.

     

         4.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute but one and the
      same instrument. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

         5.
      This
      Agreement shall be binding upon, and inure to the benefit of, the parties hereto
      and their respective heirs, representatives, successors and
      assigns.

     

         6. In
      the
      event any legal proceedings are initiated by either party in connection with
      any
      aspect of this Agreement, or any of the related documents, it is agreed that
      the
      venue for such legal proceedings must be in Dallas County, Texas.

     

    7. This
      Agreement shall be governed by the laws of the state of Texas. 

     

    This
      Agreement is dated and effective as of this 15th day
      of February, 2006.

     

    
      	 	 	 
	 	
              CrossPoint
                Energy, LLC

            
	 
 	 
 	 
 
	 	By:  	
               /s/
                Ronald
                D. Ormand

            
	 	
              

              Ronald
                D. Ormand, Chairman of the Board

            

    

    
      
        	 	 	 
	 
 	 
 	 
 
	 	  	
                 /s/
                  Daniel
                  F. Collins

              
	 	
                

                
                  Daniel
                    F. Collins

                

              

      

    

    
      
        
          	 	 	 
	 
 	 
 	 
 
	 	  	
                   /s/
                    Jeffery
                    A. Krakos

                
	 	
                  

                  
                    Jeffery
                      A. Krakos

                  

                

        

      

      
        
          	 	 	 
	 
 	 
 	 
 
	 	  	
                   /s/
                    DeAnn
                    C. Krakos

                
	 	
                  

                  
                    DeAnn
                      C. Krakos

                  

                

        

      

      
        
          	 	 	 
	 
 	 
 	 
 
	 	  	
                   /s/
                    Rosa
                    L. Collins

                
	 	
                  

                  
                    Rosa
                      L. Collins

                  

                

        

      

       

      
        
          
          

        

        
          2

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