Document:

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Carl L. Green &                                        )     C.A. No.
Dawn Martinson Green                                   )
                                                       )
                                  Plaintiffs,          )
                                                       )
v.                                                     )     COMPLAINT
                                                       )
Locate Plus Holdings Corporation, a                    )
 Delaware Corporation,                                 )
James Fields, President & CEO & CFO & Director         )
 Locate Plus Holdings Corporation,                     )
Jon Latorella, Chairman & Director Locate Plus         )
 Holdings Corporation,                                 )
                                                       )
                                  Defendants.          )

                                     PARTIES

Locate Plus Holdings Corporation a Delaware Corporation located at
addressStreet1201 Market Street Suite 1600 CityWilmington, StateDE
PostalCode19801. The registered agent at such address is PHS Corporate Services,
Inc.

James Fields upon information and belief is a resident of
placeStateMassachusetts and the President and CEO and CFO and Director of Locate
Plus Holdings Corporation located at addressStreet1201 Market Street Suite 1600
CityWilmington, StateDE PostalCode19801. The registered agent at such address is
PHS Corporate Services, Inc.

Jon Latorella Chairman of the Board & Director of Locate Plus Holdings
Corporation located at addressStreet1201 Market Street Suite 1600
CityWilmington, StateDE PostalCode19801. The registered agent at such address is
PHS Corporate Services, Inc.

                                  JURISDICTION

This court has jurisdiction pursuant to Del. Code Annotated Title 8 ss. 123,
131, 219 and the Delaware General Corporation Law ("DGCL").

                                CLAIM FOR RELIEF
                 (Direct Suit for injury which is distinct and
                    disproportionate to other share holders)

1.   This is a direct suit brought by the plaintiff because the plaintiff's
     ability to gain control of the corporation through voting rights and
     economic value was diluted, causing injury. As a consequence the plaintiff
     is harmed unequally and individually to the same extent the defendants have
     benefited.

2.   The defendants have breached their fiduciary duty of care and loyalty. They
     have acted with gross negligence. The company directors and defendants have
     failed to manage the company in good faith.

<PAGE>

3.   This lawsuit also involves statutory rights of the shareholder concerning
     the rights to inspect corporate books and records and to make premises
     inspection.

4.   A derivative suit can not suffice to adequately compensate the injured
     plaintiff, and there is no chance of multiple lawsuits, prejudice to
     creditors, or interference with a fair distribution to all shareholders.

5.   The officers and directors of Locate Plus Holdings Corporation have
     impaired the plaintiff's ability to benefit from its investment. The
     corporation and its officers and directors employed various devices and
     techniques to prevent control of the corporation through voting rights and
     increased economic value by dilution. Injury has resulted through such
     means as:

     (a) withholding information
     (b) legal techniques in preventing shareholders from getting information
     (c) dilution of shareholder interest by techniques of technical default and
         bonus and option plans
     (d) failure to properly report, provide, or update current shareholder
         information

6.   The transaction claimed herein constitutes an expropiration of voting power
     to the corresponding deterrent of the plaintiff.

7.   The defendants issued an excessive number of shares in exchange for voting
     rights and to retain control of the company.

8.   The defendants James Fields and Jon Latorella without any significant cost
     to themselves did not suffer a dilution of voting power which in return
     reduced the plaintiffs interest from over 5% to approximately 3% and with
     increased economic value from $60,000 to over $200,000 reduced it down to
     $30,000. The plaintiff has suffered harm unique to them individually that
     can be remedied by bringing this direct claim.

9.   The defendants are officers and directors having effective control that
     caused the corporation to issue excessive shares of its stock in exchange
     for voting rights of the controlling stock.

10.  The issuance of excessive shares along with threat of further dilution by
     another 75 million shares of stock collapse the stock price and significant
     economic value.

11.  The means to achieve the dilution of economic collapse in share price was
     an over issuance of shares for the alleged benefit of the debt holder
     issued and used by the corporation for voting power.

12.  The plaintiff is harmed by this practice and has a claim to compel relief
     based on misconduct by those in control of the corporation and based on
     reasonable expectations.

13.  The end result or expected result of this transaction is an improper
     transfer or expropriation of voting power and harm has resulted in a loss
     of voting power as well as economic value.

14.  There was a redistribution of economic power and voting power embodied in
     the interest of the plaintiffs.

<PAGE>

15.  Plaintiff is entitled to recover the value represented by the over issuance
     directly and without regard to any claim the corporation may have.

16.  The defendants actions are a product of transactional creativity to evade
     the law by dressing what is prohibited in substance in the form of that
     which is permissible.

                                PRAYER FOR RELIEF

WHEREFORE, Plaintiff seeks the following relief:

         a.  An injunction prohibiting the defendants from using the excessive
             shares to deny the shareholder the ability to gain control of the
             corporation through voting rights and increased economic value.

         b.  An injunction prohibiting the defendants from having a shareholder
             meeting without giving plaintiffs access to shareholder
             information.

         c.  Relief based on misconduct by those in control of the corporation.

         d.  Relief based on reasonable expectations.

         e.  Relief based on shareholders right to inspect corporate books and
             records and made premises inspections.

         f.  For cost and reasonable fees.

         g.  For such other relief as is just and the circumstances may require.

         Dated September 7, 2008

                         CARL L. GREEN             DAWN MARTINSON GREEN

                       By______________________    __________________________
                         523 E 11th Street         523 E 11th Street
                         Duluth, MN 55805          Duluth, MN 55805
                         218-722-5512              218-722-5512petro_8k-ex1001.htm

    
      Exhibit
10.1

      
        

        

      

       

       

       

       

      Credit
Agreement

       

      Dated
as of

      September
9, 2008

       

      among

       

      Petro
Resources Corporation,

      as
Borrower,

       

      CIT
Capital USA Inc.,

      as
Administrative Agent,

       

      and

       

      The
Lenders Party Hereto

       

      
        

      

       

      
 Sole
Lead Arranger and Sole Bookrunner

       

      CIT
Capital Securities LLC

       

       

       

      
 

       

      
        

        

      

      
        
          
             

             

          

           

        

        
           

          
            

          

        

        
           

        

      

      TABLE
OF CONTENTS

       

       

      
        
          	
                  ARTICLE
      I 

                  DEFINITIONS
      AND ACCOUNTING MATTERS

                

        

      

      
        	 
      	 
      	
                Page

              
	
                Section
      1.01

              	
                Terms
      Defined Above

              	
                1

              
	
                Section
      1.02

              	
                Certain
      Defined Terms

              	
                1

              
	
                Section
      1.03

              	
                Types
      of Loans and Borrowings

              	
                22

              
	
                Section
      1.04

              	
                Terms
      Generally; Rules of Construction

              	
                22

              
	
                Section
      1.05

              	
                Accounting
      Terms and Determinations; GAAP

              	
                23

              

      

       

      
        
          	
                  ARTICLE
      II

                  THE
      CREDITS

                

        

      

      
        	 	 	 
	
                Section
      2.01

              	
                Commitments

              	
                23

              
	
                Section
      2.02

              	
                Loans
      and Borrowings.

              	
                23

              
	
                Section
      2.03

              	
                Requests
      for Borrowings

              	
                24

              
	
                Section
      2.04

              	
                Interest
      Elections; Conversions.

              	
                25

              
	
                Section
      2.05

              	
                Funding
      of Borrowings.

              	
                27

              
	
                Section
      2.06

              	
                Termination
      and Reduction of Aggregate Maximum Credit Amounts.

              	
                27

              
	
                Section
      2.07

              	
                Borrowing
      Base.

              	
                28

              
	
                Section
      2.08

              	
                Letters
      of Credit.

              	
                30

              

      

       

      
        
          	
                  ARTICLE
      III

                  PAYMENTS
      OF PRINCIPAL AND INTEREST; PREPAYMENTS;
FEES

                

        

      

      
        	 	 	 
	
                Section
      3.01

              	
                Repayment
      of Loans

              	
                34

              
	
                Section
      3.02

              	
                Interest.

              	
                34

              
	
                Section
      3.03

              	
                Alternate
      Rate of Interest

              	
                35

              
	
                Section
      3.04

              	
                Prepayments.

              	
                35

              
	
                Section
      3.05

              	
                Fees.

              	
                37

              

      

       

      
        
          	
                  ARTICLE
      IV

                  PAYMENTS;
      PRO RATA TREATMENT; SHARING OF
SET-OFFS

                

        

         

      

      
        	 	 	 
	
                Section
      4.01

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

              	
                38

              
	
                Section
      4.02

              	
                Presumption
      of Payment by the Borrower

              	
                39

              
	
                Section
      4.03

              	
                Certain
      Deductions by the Administrative Agent

              	
                40

              
	
                Section
      4.04

              	
                Disposition
      of Proceeds

              	
                40

              

      

       

      
        
          	
                  ARTICLE
      V

                  INCREASED
      COSTS; BREAK FUNDING PAYMENTS;
TAXES

                

        

      

      
        	 	 	 
	
                Section
      5.01

              	
                Increased
      Costs.

              	
                40

              
	
                Section
      5.02

              	
                Break
      Funding Payments

              	
                41

              
	
                Section
      5.03

              	
                Taxes.

              	
                41

              
	
                Section
      5.04

              	
                Designation
      of Different Lending Office

              	
                42

              

      

      
        
          
             

             

             

          

           

        

        
          -i-

          
            

          

        

        
           

        

      

       

      
        
          	
                  ARTICLE
      VI

                  CONDITIONS
      PRECEDENT

                

        

      

      
        	 	 	 
	
                Section
      6.01

              	
                Effective
      Date

              	
                43

              
	
                Section
      6.02

              	
                Each
      Credit Event

              	
                45

              

      

       

      
        
          	
                  ARTICLE
      VII

                  REPRESENTATIONS
      AND WARRANTIES

                

        

      

      
        	 	 	 
	
                Section
      7.01

              	
                Organization;
      Powers

              	
                46

              
	
                Section
      7.02

              	
                Authority;
      Enforceability

              	
                47

              
	
                Section
      7.03

              	
                Approvals;
      No Conflicts

              	
                47

              
	
                Section
      7.04

              	
                Financial
      Condition; No Material Adverse Change

              	
                47

              
	
                Section
      7.05

              	
                Litigation

              	
                48

              
	
                Section
      7.06

              	
                Environmental
      Matters

              	
                48

              
	
                Section
      7.07

              	
                Compliance
      with the Laws and Agreements; No Defaults

              	
                49

              
	
                Section
      7.08

              	
                Investment
      Company Act

              	
                50

              
	
                Section
      7.09

              	
                Taxes

              	
                50

              
	
                Section
      7.10

              	
                ERISA

              	
                50

              
	
                Section
      7.11

              	
                Disclosure;
      No Material Misstatements

              	
                50

              
	
                Section
      7.12

              	
                Insurance

              	
                51

              
	
                Section
      7.13

              	
                Restriction
      on Liens

              	
                51

              
	
                Section
      7.14

              	
                Subsidiaries

              	
                51

              
	
                Section
      7.15

              	
                Location
      of Business and Offices

              	
                51

              
	
                Section
      7.16

              	
                Properties;
      Titles, Etc.

              	
                52

              
	
                Section
      7.17

              	
                Maintenance
      of Properties

              	
                53

              
	
                Section
      7.18

              	
                Gas
      Imbalances, Prepayments

              	
                53

              
	
                Section
      7.19

              	
                Marketing
      of Production

              	
                53

              
	
                Section
      7.20

              	
                Swap
      Agreements

              	
                54

              
	
                Section
      7.21

              	
                Use
      of Loans and Letters of Credit

              	
                54

              
	
                Section
      7.22

              	
                Solvency

              	
                54

              
	
                Section
      7.23

              	
                Casualty
      Events

              	
                54

              
	
                Section
      7.24

              	
                Material
      Agreements

              	
                54

              
	
                Section
      7.25

              	
                No
      Brokers

              	
                55

              
	
                Section
      7.26

              	
                Reliance

              	
                55

              
	
                Section
      7.27

              	
                Payments
      by Purchasers of Production

              	
                55

              
	
                Section
      7.28

              	
                Existing
      Accounts Payable

              	
                55

              
	
                Section
      7.29

              	
                Development
      Plan

              	
                56

              

      

       

      
        
          	
                   

                  ARTICLE
      VIII

                  AFFIRMATIVE
      COVENANTS

                

        

      

      
        	 	 	 
	
                Section
      8.01

              	
                Financial
      Statements; Ratings Change; Other Information

              	
                56

              
	
                Section
      8.02

              	
                Notices
      of Material Events

              	
                59

              
	
                Section
      8.03

              	
                Existence;
      Conduct of Business

              	
                59

              
	
                Section
      8.04

              	
                Payment
      of Obligations

              	
                59

              
	
                Section
      8.05

              	
                Operation
      and Maintenance of Properties

              	
                60

              
	
                Section
      8.06

              	
                Insurance

              	
                60

              
	
                Section
      8.07

              	
                Books
      and Records; Inspection Rights

              	
                61

              
	
                Section
      8.08

              	
                Compliance
      with Laws

              	
                61

              
	
                Section
      8.09

              	
                Environmental
      Matters

              	
                61

              
	
                Section
      8.10

              	
                Further
      Assurances

              	
                62

              

      

       

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

       

      
        	
                Section
      8.11

              	Reserve
      Reports	
                62

              
	
                Section
      8.12

              	
                Title
      Information

              	
                63

              
	
                Section
      8.13

              	
                Additional
      Collateral; Additional Guarantors

              	
                64

              
	
                Section
      8.14

              	
                ERISA
      Compliance

              	
                65

              
	
                Section
      8.15

              	
                Swap
      Agreements

              	
                65

              
	
                Section
      8.16

              	
                Marketing
      Activities

              	
                66

              
	
                Section
      8.17

              	
                Modifications
      to Development Plan

              	
                66

              
	
                Section
      8.18

              	
                Operating
      Account, Deposit Accounts and Securities Accounts

              	
                66

              
	
                Section
      8.19

              	
                Performance
      of Obligations under Loan Documents

              	
                67

              

      

       

      
        
          	
                  ARTICLE
      IX

                  NEGATIVE
      COVENANTS

                

        

      

      
        	 	 	 
	
                Section
      9.01

              	
                Financial
      Covenants

              	
                67

              
	
                Section
      9.02

              	
                Debt

              	
                68

              
	
                Section
      9.03

              	
                Liens

              	
                68

              
	
                Section
      9.04

              	
                Dividends,
      Distributions and Redemptions

              	
                69

              
	
                Section
      9.05

              	
                Investments,
      Loans and Advances

              	
                70

              
	
                Section
      9.06

              	
                Nature
      of Business

              	
                71

              
	
                Section
      9.07

              	
                Limitation
      on Leases

              	
                71

              
	
                Section
      9.08

              	
                Proceeds
      of Notes

              	
                71

              
	
                Section
      9.09

              	
                ERISA
      Compliance

              	
                72

              
	
                Section
      9.10

              	
                Sale
      or Discount of Receivables

              	
                72

              
	
                Section
      9.11

              	
                Mergers,
      Etc

              	
                72

              
	
                Section
      9.12

              	
                Sale
      of Properties

              	
                72

              
	
                Section
      9.13

              	
                Environmental
      Matters

              	
                73

              
	
                Section
      9.14

              	
                Transactions
      with Affiliates

              	
                73

              
	
                Section
      9.15

              	
                Subsidiaries

              	
                73

              
	
                Section
      9.16

              	
                Negative
      Pledge Agreements; Dividend Restrictions

              	
                74

              
	
                Section
      9.17

              	
                Gas
      Imbalances, Take-or-Pay or Other Prepayments

              	
                74

              
	
                Section
      9.18

              	
                Swap
      Agreements

              	
                74

              
	
                Section
      9.19

              	
                Development
      Plan

              	
                74

              

      

       

      
        
          	
                  ARTICLE
      X

                  EVENTS
      OF DEFAULT; REMEDIES

                

        

      

      
        	 	 	 
	
                Section
      10.01

              	
                Events
      of Default

              	
                75

              
	
                Section
      10.02

              	
                Remedies

              	
                77

              

      

       

      
        
          	
                   

                  ARTICLE
      XI

                  THE
      ADMINISTRATIVE AGENT

                

        

      

      
        	 	 	 
	
                Section
      11.01

              	
                Appointment;
      Powers

              	
                78

              
	
                Section
      11.02

              	
                Duties
      and Obligations of Administrative Agent

              	
                78

              
	
                Section
      11.03

              	
                Action
      by Administrative Agent

              	
                79

              
	
                Section
      11.04

              	
                Reliance
      by Administrative Agent

              	
                80

              
	
                Section
      11.05

              	
                Subagents

              	
                80

              
	
                Section
      11.06

              	
                Resignation
      or Removal of Administrative Agent

              	
                80

              
	
                Section
      11.07

              	
                Administrative
      Agent as Lender

              	
                81

              
	
                Section
      11.08

              	
                No
      Reliance

              	
                81

              

      

       

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

       

      
        	
                Section
      11.09

              	
                Administrative
      Agent May File Proofs of Claim

              	
                82

              
	
                Section
      11.10

              	
                Authority
      of Administrative Agent to Release Collateral and Liens

              	
                82

              
	
                Section
      11.11

              	
                The
      Arranger

              	
                82

              

      

       

      
        
          	
                  ARTICLE
      XII

                  MISCELLANEOUS

                

        

      

      
        	 	 	 
	
                Section
      12.01

              	
                Notices

              	
                83

              
	
                Section
      12.02

              	
                Waivers;
      Amendments

              	
                83

              
	
                Section
      12.03

              	
                Expenses,
      Indemnity; Damage Waiver

              	
                84

              
	
                Section
      12.04

              	
                Successors
      and Assigns

              	
                87

              
	
                Section
      12.05

              	
                Survival;
      Revival; Reinstatement

              	
                90

              
	
                Section
      12.06

              	
                Counterparts;
      Integration; Effectiveness

              	
                90

              
	
                Section
      12.07

              	
                Severability

              	
                91

              
	
                Section
      12.08

              	
                Right
      of Setoff

              	
                91

              
	
                Section
      12.09

              	
                GOVERNING
      LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

              	
                91

              
	
                Section
      12.10

              	
                Headings

              	
                93

              
	
                Section
      12.11

              	
                Confidentiality

              	
                93

              
	
                Section
      12.12

              	
                Interest
      Rate Limitation

              	
                93

              
	
                Section
      12.13

              	
                EXCULPATION
      PROVISIONS

              	
                94

              
	
                Section
      12.14

              	
                Collateral
      Matters; Swap Agreements

              	
                95

              
	
                Section
      12.15

              	
                No
      Third Party Beneficiaries

              	
                95

              
	
                Section
      12.16

              	
                USA
      Patriot Act Notice

              	
                95

              
	
                Section
      12.17

              	
                Intercreditor
      Agreement

              	
                95

              

      

       

      
        
          
             

             

             

          

           

        

        
          -iv-

          
            

          

        

        
           

        

      

       

      ANNEXES,
EXHIBITS AND SCHEDULES

       

       

       

      
        	
                Annex
      I

              	
                List
      of Maximum Credit Amounts

              
	 
      	 
      
	
                Exhibit
      A

              	
                Form
      of Note

              
	
                Exhibit
      B

              	
                Form
      of Borrowing Request

              
	
                Exhibit
      C

              	
                Form
      of Interest Election Request

              
	
                Exhibit
      D

              	
                Form
      of Compliance Certificate

              
	
                Exhibit
      E

              	
                Development
      Plan

              
	
                Exhibit
      F

              	
                Security
      Instruments

              
	
                Exhibit
      G

              	
                Form
      of Assignment and Assumption

              
	
                 
      

              	 
      
	 
      	 
      
	
                Schedule
      1.02

              	
                Approved
      Counterparties

              
	
                Schedule
      7.05

              	
                Litigation

              
	
                Schedule
      7.14

              	
                Subsidiaries
      and Partnerships

              
	
                Schedule
      7.18

              	
                Gas
      Imbalances

              
	
                Schedule
      7.19

              	
                Marketing
      Contracts

              
	
                Schedule
      7.20

              	
                Swap
      Agreements

              
	
                Schedule
      7.24

              	
                Material
      Agreements

              
	
                Schedule
      7.28

              	
                Existing
      Accounts Payable

              
	
                Schedule
      8.13

              	
                Additional
      Oil & Gas Properties

              
	
                Schedule
      9.12

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

              

      

       

      
        
          
             

             

             

          

           

        

        
          -v-

          
            

          

        

        
           

        

      

      

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

         

        R E C I T A L
S

         

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

         

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

         

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

         

        ARTICLE
I

        Definitions
and Accounting Matters

         

        

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -1-

            
              

            

          

          
            
            

          

        

         

        “Applicable Margin”
means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with
respect to the Commitment Fee Rate, as the case may be, the rate per annum set
forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base
Utilization Percentage then in effect:

        

        
          	
                  Borrowing
      Base Utilization Grid

                
	 	 	 	 
	
                  Borrowing
      Base Utilization 

                	
                  <
      33.33%

                	
                  ≥
      33.33%

                	
                  ≥66.66%

                
	Percentage	 	
                  <
    66.66%

                	 
	
                  Eurodollar
      Loans

                	
                  2.000%

                	
                  2.250%

                	
                  2.500%

                
	
                  ABR
      Loans

                	
                  1.000%

                	
                  1.250%

                	
                  1.500%

                
	
                  Commitment
      Fee Rate

                	
                  0.375%

                	
                  0.375%

                	
                  0.500%

                

        

        

        Each
change in the Applicable Margin or Commitment Fee Rate shall apply during the
period commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change, provided,
however, that if at any time the Borrower fails to deliver a Reserve Report
pursuant to Section 8.11(a), then the “Applicable Margin”
and the “Commitment
Fee Rate” means the rate per annum set forth on the grid when the
Borrowing Base Utilization Percentage is at its highest level, provided further
that, upon the delivery of such Reserve Report, the “Applicable Margin”
and the “Commitment
Fee Rate” means the rate per annum applicable immediately prior to the
rate increase as a result of the failure to deliver such Reserve
Report.

         

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

         

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

         

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

         

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

        “Borrowing Base” means
at any time an amount equal to the amount determined in accordance with Section
2.07, as the same may be adjusted from time to time pursuant to Section 8.12(c)
and Section 9.12(d).

         

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

         

        “Borrowing Base Utilization
Percentage” means, as of any day, the fraction expressed as a percentage,
the numerator of which is the sum of the Revolving Credit Exposures of the
Lenders on such day, and the denominator of which is the Borrowing Base in
effect on such day.

         

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

         

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

         

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

        “Commitment Fee Rate”
has the meaning set forth in the definition of “Applicable
Margin”.

         

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

         

        “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.

         

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

        

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

         

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

         

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

         

        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

        “Indemnified Taxes”
means Taxes other than Excluded Taxes.

         

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

        

        “Intercreditor
Agreement” means that certain Intercreditor Agreement by and among the
Borrower, the Administrative Agent and the administrative agent to the Second
Lien Term Loan Agreement, dated as of the date hereof, as the same may from time
to time be amended, modified, supplemented or restated in accordance with the
provisions thereof and Section 9.04(b).

         

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

         

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

         

        “Interest Expense”
means, for any period, the sum (determined without duplication) of the aggregate
gross interest expense of the Borrower and the Consolidated Subsidiaries for
such period, including to the extent included in interest expense under
GAAP:  (a) amortization of debt discount (other than those expenses
associated with the Existing Credit Agreement), (b) capitalized interest and (c)
the portion of any payments or accruals under Capital Leases allocable to
interest expense, plus the portion of any payments or accruals under Synthetic
Leases allocable to interest expense whether or not the same constitutes
interest expense under GAAP; provided that Interest Expense for the fiscal
quarters ending December 31, 2008, March 31, 2009 and June 30, 2009 shall be
calculated as follows:

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

        “Macquarie
Intercreditor Agreement” means that
certain Intercreditor and Collateral Agency Agreement by and among the
Borrower, Macquarie Bank Limited, the Administrative Agent and the
Administrative Agent, as collateral agent thereunder, dated as of the date
hereof, as the same may from time to time be amended, modified, supplemented or
restated in accordance with the provisions thereof.

         

        “Majority Lenders”
means, at any time while no Loans  or LC Exposure is outstanding,
Lenders having more than fifty percent (50%) of the Aggregate Maximum Credit
Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders
holding more than fifty percent (50%) of the outstanding aggregate principal
amount of the Loans and participation interests in Letters of Credit (without
regard to any sale by a Lender of a participation in any Loan under Section
12.04(c)); provided, that if there are only two Lenders, both Lenders shall be
required to constitute the “Majority Lenders”.

         

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

         

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

         

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

         

        
          
            
            

          

          
            -15-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -16-

            
              

            

          

          
            
            

          

        

         

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

        

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -17-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -18-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

        “Required Lenders”
means, at any time while no Loans or LC Exposure is outstanding, Lenders having
at least sixty-six and two-thirds percent (66 2/3%) of the Aggregate Maximum
Credit Amounts; and at any time while any Loans or LC Exposure is outstanding,
Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding aggregate principal amount of the Loans or participation interests
in such Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)) provided, that if there are
only two Lenders, both Lenders shall be required to constitute the “Required
Lenders”.

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
            -19-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

        “Second Lien Notes”
means the $15,000,000 Second Lien Term Notes issued pursuant to the Second Lien
Term Loan Agreement, together with all amendments, modifications, replacements,
extensions and rearrangements thereof permitted by Section 9.04(b).

         

        “Second Lien Term Loan
Agreement” means that certain Second Lien Term Loan Agreement dated as of
the date hereof among the Borrower, CIT, as the Second Lien Administrative
Agent, and the lenders party thereto, together with all amendments,
modifications and supplements thereto permitted by Section 9.04(b).

         

        “Second Lien Term Loan
Documents” means the Second Lien Term Loan Agreement, the Second Lien
Notes and any “Loan Documents” (as defined therein), in each case, together with
all amendments, modifications and supplements thereto permitted by Section
9.04(b).

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

        
          Section
1.04 Terms Generally; Rules of
Construction.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter
forms.  

        

         

         

        
          
            
            

          

          
            -22-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

        ARTICLE
II

        The
Credits

         

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

         

        Section
2.02 Loans and
Borrowings.

         

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

         

         

        
          
            
            

          

          
            -23-

            
              

            

          

          
            
            

          

        

         

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

         

        (c) Minimum Amounts; Limitation
on Number of Borrowings.  At the commencement of each Interest
Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not
less than $500,000.  At
the time that each ABR Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $500,000 and not less
than $500,000; provided that
an ABR Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section
2.08(e).  Borrowings of more than one Type may be outstanding at the
same time, provided that there shall not at any time be more than a total of
six (6)
Eurodollar Borrowings outstanding.  Notwithstanding any other
provision of this Agreement, the Borrower shall not be entitled to request, or
to elect to convert or continue, any Borrowing if the Interest Period requested
with respect thereto would end after the Termination Date.

         

        (d) Notes.  The
Loans made by each Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A, dated, in the case of (i) any
Lender party hereto as of the date of this Agreement, as of the date of this
Agreement or (ii) any Lender that becomes a party hereto pursuant to an
Assignment and Assumption, as of the effective date of the Assignment and
Assumption payable to the order of such Lender in a principal amount equal to
its Maximum Credit Amount as in effect on such date, and otherwise duly
completed.  In the event that any Lender’s Maximum Credit Amount
increases or decreases for any reason (whether pursuant to Section 2.06, Section
12.04 or otherwise), the Borrower shall deliver or cause to be delivered on the
effective date of such increase or decrease, a new Note payable to the order of
such Lender in a principal amount equal to its Maximum Credit Amount after
giving effect to such increase or decrease, and otherwise duly
completed.  The date, amount, Type, interest rate and, if applicable,
Interest Period of each Loan made by each Lender, and all payments made on
account of the principal thereof, shall be recorded by such Lender on its books
for its Note, and, prior to any transfer, may be endorsed by such Lender on a
schedule attached to such Note or any continuation thereof or on any separate
record maintained by such Lender.  Failure to make any such notation
or to attach a schedule shall not affect any Lender’s or the Borrower’s rights
or obligations in respect of such Loans or affect the validity of such transfer
by any Lender of its Note.  

         

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

         

        
          
            
            

          

          
            -24-

            
              

            

          

          
            
            

          

        

         

        (i) the
aggregate amount of the requested Borrowing;

         

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

         

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

         

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

         

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

         

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

         

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

         

        Each
Borrowing Request shall constitute a representation that the amount of the
requested Borrowing shall not cause the total Revolving Credit Exposures to
exceed the total Commitments (i.e., the lesser of the Aggregate Maximum Credit
Amounts and the then effective Borrowing Base).

         

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

         

        Section
2.04 Interest
Elections;
Conversions.

         

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

         

        
          
            
            

          

          
            -25-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        Section
2.05 Funding of
Borrowings.

         

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

         

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

         

        Section
2.06 Termination and Reduction of
Aggregate Maximum Credit Amounts.

         

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

         

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

         

        (i) The
Borrower may at any time terminate, or from time to time reduce, the Aggregate
Maximum Credit Amounts; provided that (A) each reduction of the Aggregate
Maximum Credit Amounts shall be in an amount that is an integral multiple of
$500,000 and
not less than $500,000 and (B) the
Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if,
after giving effect to any concurrent prepayment of the Loans in accordance with
Section 3.04(a), the total Revolving Credit Exposures would exceed the total
Commitments.

         

        
          
            
            

          

          
            -27-

            
              

            

          

          
            
            

          

        

         

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

         

        Section
2.07 Borrowing
Base.

         

        (a) Initial Borrowing
Base.  For the period from and including the Effective Date to
but excluding the first Redetermination Date, the amount of the Borrowing Base
shall be $17,000,000.  Notwithstanding
the foregoing, the Borrowing Base may be subject to further adjustments from
time to time pursuant to Section 8.12(c) or Section 9.12.

         

        (b) Scheduled and Interim
Redeterminations.  The Borrowing Base shall be redetermined
semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined
Borrowing Base shall become effective and applicable to the Borrower, the
Issuing Bank and the Lenders on May 1st and November 1st of each year,
commencing November
1, 2008.  In addition, the Borrower may, by notifying the Administrative Agent
thereof, and the Administrative Agent may, at the direction of the Required
Lenders, by notifying the Borrower thereof, one time during any 6-month period
between Scheduled Redeterminations, each elect to cause the Borrowing Base to be
redetermined (an “Interim
Redetermination”) in accordance with this Section 2.07.

         

        (c) Scheduled and Interim
Redetermination Procedure.

         

        (i) Each
Scheduled Redetermination and each Interim Redetermination shall be effectuated
as follows:  Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, (1) in the case of a Scheduled Redetermination,
pursuant to Section 8.11(a) and (c), and (2) in the case of an Interim
Redetermination, pursuant to Section 8.11(b) and (c), and (B) such other
reports, data and supplemental information, including, without limitation, the
information provided pursuant to Section 8.11(c), as may, from time to time, be
reasonably requested by the Majority Lenders (the Reserve Report, such
certificate and such other reports, data and supplemental information being the
“Engineering
Reports”), the Administrative Agent shall evaluate the information
contained in the Engineering Reports and shall, in good faith, propose a new
Borrowing Base (the “Proposed Borrowing
Base”) based upon such information and such other information (including,
without limitation, the status of title information with respect to the Oil and
Gas Properties as described in the Engineering Reports and the existence of any
other Debt) as the Administrative Agent deems appropriate in its sole discretion
and consistent with its normal oil and gas lending criteria as it exists at the
particular time.  In no event shall the Proposed Borrowing Base exceed
the Aggregate Maximum Credit Amounts.

         

        
          
            
            

          

          
            -28-

            
              

            

          

          
            
            

          

        

         

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

         

        (A) in the
case of a Scheduled Redetermination (1) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.11(a) and (c) in a timely and complete manner, then on or
before the April 15th and October 15th of such year following the date of
delivery or (2) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
8.11(a) and (c) in a timely and complete manner, then promptly after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and

         

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

         

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

         

        (iv) In
connection with any Scheduled Redetermination or Interim Redetermination, the
Administrative Agent and the Lenders may propose a new definition for
“Applicable Margin”.  If the Borrower agrees to such new definition,
such definition shall be in effect until the next Redetermination
Date.  If the Borrower does not agree to any proposed definition of
“Applicable Margin”, then the definition of “Applicable Margin” shall remain the
same and the Borrowing Base shall not be increased at the Redetermination
Date.

         

        
          
            
            

          

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

         

        (i) in the
case of a Scheduled Redetermination, (A) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.11(a) and (c) in a timely and complete manner, then on the
May 1st or November 1st, as applicable, following such notice, or (B) if the
Administrative Agent shall not have received the Engineering Reports required to
be delivered by the Borrower pursuant to Section 8.11(a) and (c) in a timely and
complete manner, then on the Business Day next succeeding delivery of such
notice; and

         

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

         

        Such
amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 8.12(c) or Section 9.12,
whichever occurs first.  Notwithstanding the foregoing, no Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.

         

        Section
2.08 Letters of
Credit.

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

        (c) Expiration
Date.  Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) September 9,
2011.

         

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

         

        
          
            
            

          

          
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        (e) Reimbursement.  If
the Issuing Bank shall make any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse the Administrative Agent (for itself or any
of its Affiliates) such LC Disbursement by paying to the Administrative Agent an
amount equal to such LC Disbursement (i) if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time, on the
date that such LC Disbursement is made, not later than 12:00 noon, New York City
time, on such date, or (ii) if such notice has not been received by the Borrower
prior to such time on such date, then not later than 12:00 noon, New York City
time, on (A) the Business Day that the Borrower receives such notice, if such
notice is received prior to 10:00 a.m., New York City time, on the day of
receipt, or (B) the Business Day immediately following the day that the Borrower
receives such notice, if such notice is not received prior to 10:00 a.m., New
York City time on the day of receipt; provided that any such LC Disbursement
shall, subject to the conditions to Borrowing set forth herein, be deemed to
have requested, and the Borrower does hereby request under such circumstances,
that such payment be financed with an ABR Borrowing in an equivalent amount and,
to the extent so financed, the Borrower’s obligation to make such payment shall
be discharged and replaced by the resulting ABR Borrowing.  If the
Borrower fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender’s Applicable Percentage
thereof.  Promptly following receipt of such notice, each Lender shall
pay to the Administrative Agent its Applicable Percentage of the payment then
due from the Borrower, in the same manner as provided in Section 2.05 with
respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the
Lenders.  Promptly following receipt by the Administrative Agent of
any payment from the Borrower pursuant to this Section 2.08(e), the
Administrative Agent shall distribute such payment to any Lenders that have made
payments pursuant to this Section 2.08(e) to reimburse the Administrative
Agent.  Any payment made by a Lender pursuant to this Section 2.08(e)
to reimburse the Administrative Agent for any LC Disbursement (other than the
funding of ABR Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.

         

        (f) Obligations
Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not strictly comply with the terms of such Letter of
Credit, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations
hereunder.  Neither the Administrative Agent, the Lenders nor the
Issuing Bank, nor any of their Related Parties shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Issuing Bank or the Administrative
Agent.

         

        
          
            
            

          

          
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        (g) Interim
Interest.  If the Issuing Bank shall make any LC Disbursement,
then, until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans.  Interest accrued pursuant to this Section 2.08(g) shall
be for the account of the Administrative Agent, except that interest accrued on
and after the date of payment by any Lender pursuant to Section 2.08(e) to
reimburse the Administrative Agent shall be for the account of such Lender to
the extent of such payment.

         

        (h) Cash
Collateralization.  If (i) any Event of Default shall occur and
be continuing and the Borrower receives notice from the Administrative Agent or
the Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(h), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account designated by the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash equal
to, in the case of an Event of Default, the LC Exposure, and in the case of a
payment required by Section 3.04(c), the amount of such excess as provided in
Section 3.04(c), as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower or any Subsidiary described in
Section 10.01(h) or Section 10.01(i).  The Borrower hereby grants to
the Administrative Agent, for the benefit of it and the Lenders, an exclusive
first priority and continuing perfected security interest in and Lien on such
account and all cash, checks, drafts, certificates and instruments, if any, from
time to time deposited or held in such account, all deposits or wire transfers
made thereto, any and all investments purchased with funds deposited in such
account, all interest, dividends, cash, instruments, financial assets and other
Property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing, and all proceeds, products,
accessions, rents, profits, income and benefits therefrom, and any substitutions
and replacements therefor.  The Borrower’s obligation to deposit
amounts pursuant to this Section 2.08(h) shall be absolute and unconditional,
without regard to whether any beneficiary of any such Letter of Credit has
attempted to draw down all or a portion of such amount under the terms of a
Letter of Credit, and, to the fullest extent permitted by applicable law, shall
not be subject to any defense or be affected by a right of set-off, counterclaim
or recoupment which the Borrower or any of its Subsidiaries may now or hereafter
have against any such beneficiary, the Issuing Bank, the Administrative Agent,
the Lenders or any other Person for any reason whatsoever.  Such
deposit shall be held as collateral securing the payment and performance of the
Borrower’s and the Guarantor’s obligations under this Agreement and the other
Loan Documents.  The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Borrower’s risk and expense, such deposits
shall not bear interest.  Interest or profits, if any, on such
investments shall accumulate in such account.  Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated, be applied to satisfy other obligations of the Borrower
and the Guarantors under this Agreement or the other Loan
Documents.  So long as no Event of Default exists, the Administrative
Agent shall release to the Borrower, at the Borrower’s written request, any
funds held in such account in excess of the amount required to be on deposit to
secure LC Exposure in connection with a prepayment required by Section
3.04(c).

         

        
          
            
            

          

          
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        ARTICLE
III

        Payments
of Principal and Interest; Prepayments; Fees

         

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

         

        Section
3.02 Interest.

         

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

         

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

         

        (c) Post-Default
Rate.  Notwithstanding the foregoing, (i) if an Event of
Default has occurred and is continuing, or if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower or any Guarantor
hereunder or under any other Loan Document is not paid when due, whether at
stated maturity, upon acceleration or otherwise, and including any payments in
respect of a Borrowing Base Deficiency under Section 3.04(c), then all Loans
outstanding, in the case of an Event of Default, and such overdue amount, in the
case of a failure to pay amounts when due, shall bear interest, after as well as
before judgment, at the Post Default Rate, but in no event to exceed the Highest
Lawful Rate, and (ii)  during any Borrowing Base Deficiency, all Loans
outstanding at such time shall bear interest, after as well as before judgment,
at the Post Default Rate, but in no event to exceed the Highest Lawful
Rate.

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

        Section
3.04 Prepayments.

         

        (a) Optional
Prepayments.  Subject to any break funding costs payable
pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b),
the Borrower shall have the right at any time and from time to time to prepay
any Borrowing in whole or in part, in minimum increments of $250,000 or, if less
than $250,000, the remaining balance of the Loans.

         

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

         

        
          
            
            

          

          
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        (c) Mandatory
Prepayments.

         

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

         

        (ii) Upon any
redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07, Section 8.12(c) or Section 9.12, if the total
Revolving Credit Exposures exceeds the redetermined or adjusted Borrowing Base,
then the Borrower shall:

         

        (A) 
(1) within sixty (60) days following its
receipt of the New Borrowing Base Notice in accordance with Section 2.07(d) or
the date the adjustment occurs, prepay the Borrowings in an aggregate
principal amount equal to such excess; or

         

        (2) within sixty (60) days following its receipt of the New
Borrowing Base Notice in accordance with Section 2.07(d) or
the date the adjustment occurs,
pledge additional collateral to the Administrative Agent having a value equal to
at least the amount of the deficiency or otherwise satisfactory to the
Administrative Agent such that the total Revolving Credit Exposures are less
than or equal to the Borrowing Base  as redetermined or
adjusted;

         

         and

         

        (B)   cause,
for so long as any Borrowing Base Deficiency continues to exist, 100% of Excess
Cash Flow to be used to prepay the Borrowings in an amount not to exceed such
Borrowing Base Deficiency, such amounts to be paid to the Administrative Agent
within one (1) Business Day of each delivery of an Excess Cash Flow report
required by Section 8.01(l)(ii).

         

        Notwithstanding
the foregoing, all payments required to be made pursuant to this Section
3.04(c)(ii) must be made on or prior to the Termination Date.

         

        
          
            
            

          

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

         

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

         

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

         

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

         

        Section
3.05 Fees.

         

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

         

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

         

        
          
            
            

          

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

         

        (d) Borrowing Base Increase
Fees.  The Borrower agrees to pay to the Administrative Agent,
for the account of each Lender then party to this Agreement, ratably in
accordance with its Applicable Percentage, a Borrowing Base increase fee to be
agreed by the Lenders and the Borrower on the amount of any increase of the
Borrowing Base over the highest Borrowing Base previously in effect, payable on
the effective date of any such increase to the Borrowing Base.

         

        ARTICLE
IV

        Payments;
Pro Rata Treatment; Sharing of Set-offs

         

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

         

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

         

        
          
            
            

          

          
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        (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,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such
parties.

         

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

         

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

         

        
          
            
            

          

          
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        Section
4.03 Certain Deductions by the
Administrative Agent.  If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.05(b), Section 2.08(d),
Section 2.08(e) or Section 4.02 then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.

         

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

         

        ARTICLE
V

        Increased
Costs; Break Funding Payments; Taxes

         

        Section
5.01 Increased
Costs.

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

        
          Section
5.03 Taxes.

           

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

           

        

        
          
            
            

          

          
            -41-

            
              

            

          

          
            
            

          

        

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        ARTICLE
VI

        Conditions
Precedent

         

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

         

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

         

        (b) The
Administrative Agent shall have received a certificate of the Responsible
Officer of the Borrower and each Guarantor setting forth (i) resolutions of its
board of directors with respect to the authorization of the Borrower or such
Guarantor to execute and deliver the Loan Documents to which it is a party and
to enter into the transactions contemplated in those documents, (ii) the
officers of the Borrower or such Guarantor (y) who are authorized to sign the
Loan Documents to which the Borrower or such Guarantor 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 Organizational Documents of the Borrower and
such Guarantor, certified as being true and complete.  The
Administrative Agent and the Lenders may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Borrower or
such Guarantor, as applicable, to the contrary.

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        (ii) have
received certificates, together with undated, blank stock powers for each such
certificate, representing all of the issued and outstanding Equity Interests of
each of the Guarantors, which is directly owned by either the Borrower or a
Subsidiary; and

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

        (r) The
Administrative Agent shall be satisfied that there is no litigation seeking to
enjoin or prevent the financing contemplated hereby or by the Second Lien Term
Loan Agreement.

         

        (s) The
Second Lien Term Documents and the Intercreditor Agreement between the
Administrative Agent and the Second Lien Administrative Agent shall have been
duly executed and delivered.

         

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

         

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

         

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

         

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

           

        

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

        ARTICLE
VII

        Representations
and Warranties

         

        The
Borrower represents and warrants to the Lenders that:

         

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

         

        
          
            
            

          

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

         

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

         

        Section
7.04 Financial Condition; No
Material Adverse Change.

         

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

         

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

         

        
          
            
            

          

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

         

        Section
7.05 Litigation.

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        (c) No
Default has occurred and is continuing.

         

        
          
            
            

          

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

         

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

         

        Section
7.10 ERISA.

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          Section
7.11 Disclosure; No Material
Misstatements.  The Borrower has disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other 

        

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        Section
7.16 Properties; Titles,
Etc.

         

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

         

        (b) All
material leases and agreements necessary for the conduct of the business of the
Borrower and its Subsidiaries are valid and subsisting, in full force and
effect, and there exists no default or event or circumstance which with the
giving of notice or the passage of time or both would give rise to a default
under any such lease or leases, which could reasonably be expected to have a
Material Adverse Effect.

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        Section
7.23 Casualty
Events.  Since December 31, 2007, neither the business nor any
Properties of the Borrower have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any domestic or foreign
Governmental Authority, riot, activities or armed forces or acts of God or of
any public enemy.

         

        Section
7.24 Material
Agreements.  Set forth on Schedule 7.24 hereto is a complete
and correct list of all material agreements and other instruments currently
maintained by the Borrower setting forth each counterparty thereto (other than
the Loan Documents) relating to the purchase, transportation by pipeline, gas
processing, marketing, development, sale and supply of 

         

        
          
            
            

          

          
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        Hydrocarbons,
farmout arrangements, joint operating agreements, contract operating agreements
or other material contracts (excluding oil and gas leases of the Borrower) to
which the Borrower is a party on or after the Effective Date or by which its
Properties is bound on or after the Effective Date (collectively “Material Agreements”)
and copies of such documents have been provided to the Administrative
Agent.  All such agreements are in full force and effect and the
Borrower is not in default thereunder, nor is there any uncured default by any
Affiliate predecessor in interest to the Borrower or, to the Borrower’s
knowledge, by any predecessor in interest to the Borrower (other than an
Affiliate predecessor) or counterparty thereto, except, in each case, defaults
which could not reasonably be expected to cause a Material Adverse Effect, nor
has the Borrower altered any material item of such agreements since the
Effective Date without the prior written consent of the Lenders

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        Section
7.29 Development
Plan.

         

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

         

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

         

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

         

        ARTICLE
VIII

        Affirmative
Covenants

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        (a) the
occurrence of any Default;

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

        Section
8.09 Environmental
Matters.

         

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

         

        
          
            
            

          

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

         

        Section
8.10 Further
Assurances.

         

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

         

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

         

        Section
8.11 Reserve
Reports.

         

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

         

        (b) In the
event of an Interim Redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by or under the
supervision of the chief reserve engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve
Report.  For any Interim Redetermination requested by the
Administrative Agent or the Borrower pursuant to Section 2.07(b), the Borrower
shall provide such Reserve Report with an “as of” date as required by the
Administrative Agent as soon as possible, but in any event no later than thirty
(30) days following the receipt of such request.

         

        
          
            
            

          

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

         

        Section
8.12 Title
Information.

         

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

         

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

         

        
          
            
            

          

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

         

        Section
8.13 Additional Collateral;
Additional Guarantors.

         

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

         

        (b) In
connection with each redetermination of the Borrowing Base, the Borrower shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.11(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the Total Reserve Value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production.  In the event that the Mortgaged Properties do not
represent at least 80% of such Total Reserve Value, then the Borrower shall, and
shall cause its Subsidiaries to, grant, within thirty (30) days of delivery of
the certificate required under Section 8.11(c), to the Administrative Agent as
security for the Indebtedness a first-priority Lien interest (provided that (i)
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition and (ii) Liens permitted by Section 9.03 may exist) on additional Oil
and Gas Properties not already subject to a Lien of the Security Instruments
such that after giving effect thereto, the Mortgaged Properties will represent
at least 80% of such Total Reserve Value.  All such Liens will be
created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.  In
order to comply with the foregoing, if any Subsidiary places a Lien on its Oil
and Gas Properties and such Subsidiary is not a Guarantor, then it shall become
a Guarantor and comply with Section 8.13(c).

         

        
          
            
            

          

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

         

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

         

        (e) The
Borrower shall, and shall cause its Subsidiaries to, grant to the Administrative
Agent as security for the Indebtedness a first-priority Lien interest on
additional Oil and Gas Properties identified on Schedule 8.13 within thirty (30)
days of the acquisition of such Oil and Gas Properties.

         

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

         

        Section
8.15 Swap
Agreements.  The Borrower shall from time to time enter into
Swap Agreements in respect of commodities so that the notional volumes of all
Swap Agreements, in the aggregate, are more than 50% of the reasonably
anticipated projected production from the Borrower’s Proved Developed Producing
Reserves for each month until December 31, 2011.  Notwithstanding
anything to the contrary in this Agreement, the Borrower shall not assign,
terminate or unwind any Swap Agreement entered into on or before the Effective
Date.

         

        
          
            
            

          

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

         

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

         

        Section
8.18 Operating
Account,
Deposit Accounts and Securities Accounts.

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

        ARTICLE
IX

        Negative
Covenants

         

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

         

        Section
9.01 Financial
Covenants.

         

        (a) Interest Coverage
Ratio.  Commencing December 31, 2008, the Borrower will not, as
of the last day of any fiscal quarter, permit its ratio of EBITDAX to Interest
Expense for such period to be less than 2.5 to 1.0.

         

        (b) Ratio of Net Debt to
EBITDAX.  Commencing December 31, 2008, the Borrower will not,
at any time, permit its ratio of Net Debt as of such time to EBITDAX to be
greater than (i) 4.5 to 1.0 the fiscal quarters ending December 31, 2008, March
31, 2009, June 30, 2009 and September 30, 2009, and (ii) 3.5 to 1.0 for all
fiscal quarters ending thereafter.

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

        (f) Debt
under the Second Lien Notes, the principal amount of which Debt does not exceed
$15,000,000 in the aggregate; and

         

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

         

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

         

        (a) Liens
securing the payment of any Indebtedness;

         

        (b) Excepted
Liens;

         

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

         

        
          
            
            

          

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

         

        (e) Liens on
Property securing the Second Lien Notes and any guaranties thereof as permitted
by Section 9.02(f); provided, however, that such Liens securing such Debt are
subordinate to the Liens securing the Indebtedness;

         

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

         

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

         

        Section
9.04 Dividends, Distributions and
Redemptions.

         

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

         

        (b) Redemption of Second Lien
Notes; Amendment of Second Lien Term Loan Documents. The Borrower will
not, and will not permit any Subsidiary to: (i) prior to the date that is 90
days after the Termination Date, call, make or offer to make any optional or
voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether
in whole or in part) the Second Lien Notes, provided that the Borrower may
optionally prepay the Second Lien Notes, including refinancings thereof, if (A)
no Default or Event of Default has occurred and is continuing or would exist
after giving effect to such prepayment or refinancing, and (B) after giving
effect to such prepayment or refinancing, the Borrower would have at least
$5,000,000 of unused availability under the Commitments, (ii) amend, modify,
waive or otherwise change, consent or agree to any amendment, modification,
waiver or other change to, any of the terms of any Second Lien Term Loan
Document if (A) the effect thereof would be to shorten the maturity of the
Second Lien Notes or shorten the average life or increase the amount of any
payment of principal thereof or increase the rate or add call or pre-payment
premiums or shorten any period for payment of interest thereon, (B) such action
requires the payment of a consent fee (howsoever described), (C) such action
adds additional Property as collateral to secure the Second Lien Notes unless
the Borrower complies with Section 8.13 such action adds any covenants or
defaults without this Agreement being contemporaneously amended to add
substantially similar covenants or defaults, provided that the foregoing shall
not prohibit the execution of supplemental agreements to add guarantors if
required by the terms thereof provided that any such guarantor also guarantees
the Indebtedness pursuant to the Guaranty Agreement and each of the Borrower and
such guarantor otherwise complies with Section 8.13, and (iii) designate any
Debt (other than obligations of the Borrower and the Subsidiaries pursuant to
the Loan Documents) as “Senior Indebtedness” or give any such other Debt any
other similar designation

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        (c) contribute
to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to (i) any employee welfare
benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability, or (ii) any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

         

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

         

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

         

        Section
9.12 Sale of
Properties.  The Borrower will not, and will not permit any
Subsidiary to, sell, assign, farm-out, convey or otherwise transfer (including
through the sale of a production payment or overriding royalty interest) any
Property except for (a) the sale of Hydrocarbons in the ordinary course of
business; (b) farmouts of undeveloped acreage and assignments in connection with
such farmouts with such Persons who are not Related Parties of the Borrower or
its Affiliates, or relatives of such Related Parties; (c) the sale or transfer
of equipment that is no longer necessary for the business of the Borrower or
such Subsidiary or is replaced by equipment of at least comparable value and
use; (d) the sale or other disposition 

         

        
          
            
            

          

          
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        (including
Casualty Events) of any Oil and Gas Property or any interest therein or any
Subsidiary owning Oil and Gas Properties; provided that (1) 100% of the
consideration received in respect of such sale or other disposition shall be
cash, (2) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or the Subsidiary subject of such sale or
other disposition (as reasonably determined by the board of directors of the
Borrower and, if requested by the Administrative Agent, the Borrower shall
deliver a certificate of a Responsible Officer of the Borrower certifying to
that effect), (3) if the value assigned to Oil and Gas Property or Subsidiary
owning Oil and Gas Properties in the most recently delivered Reserve Report, if
any, is in excess of $250,000 (either individually or in the aggregate, the
Borrowing Base shall be reduced, effective immediately upon such sale or
disposition, by an amount equal to the value, if any, assigned such Property in
the most recently delivered Reserve Report and (4) if any such sale or other
disposition is of a Subsidiary owning Oil and Gas Properties, such sale or other
disposition shall include all the Equity Interests of such Subsidiary; (e) the
sale of the Hall Houston Minority Investment for a purchase price paid in cash
in an amount at least equal to the fair market value thereof; (f) any Working
Interest Election (as defined in the PetroBridge Participation Agreement)
pursuant to the PetroBridge Participation Agreement; (g) the assignment of
overriding royalty interest in and to the Oil & Gas Properties identified on
Schedule 9.12 pursuant to the Existing Credit Agreement and (h) sales and other
dispositions of Properties not regulated by Section 9.12(a) to (d) having a fair
market value not to exceed $250,000 during any 12-month period.

         

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        ARTICLE
X

        Events
of Default; Remedies

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        (g) any event
or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity 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 an event or condition requires the Borrower or any Subsidiary to make an
offer in respect thereof.

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        (m) a Change
in Control shall occur.

         

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

         

        (o) a failure
to cure a Borrowing Base Deficiency in accordance with Section
3.04(c)(ii).

         

        (p) the
Intercreditor Agreement, after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with its terms against the
Borrower or any party thereto or holder of the Lien subordinated thereby or
shall be repudiated by any of them, or cause the lien securing the obligations
of the Second Lien Notes to be senior or pari passu in right to the lien
securing the obligations of this Agreement.

         

        Section
10.02 Remedies.

         

        (a) In the
case of an Event of Default other than one described in Section 10.01(h),
Section 10.01(i), or Section 10.01(j), at any time thereafter during the
continuance of such Event of Default, the Administrative Agent may, and at the
request of the Majority Lenders, shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times:  (i)
terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(h)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i), or Section 10.01(j),
the Commitments shall automatically terminate and such Notes and the principal
of such Loans then outstanding, together with accrued interest thereon and all
fees and the other obligations of the Borrower and the Guarantors accrued
hereunder and under such Notes and the other Loan Documents(including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided
in Section 2.08(h)), shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.

         

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

         

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

         

        
          
            
            

          

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

         

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

         

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

         

        (iv) fourth, pro rata to payment
of principal outstanding on the Loans owing to a Lender or an Affiliate of a
Lender and Indebtedness referred to in Clause (b) of the definition of
Indebtedness owing to an Approved Counterparty;

         

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

         

        (vi) sixth, to serve as cash
collateral to be held by the Administrative Agent to secure the LC Exposure;
and

         

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

         

        

         

        ARTICLE
XI

        The
Administrative Agent

         

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

         

        Section
11.02 Duties and Obligations of
Administrative Agent.  The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan
Documents.  Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing (the use
of the term “agent” herein and in the other Loan Documents with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law;
rather, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties), (b) the Administrative Agent shall have no duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in Article VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent’s satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any
failure by the Borrower or any other Person (other than itself) to perform any
of its obligations hereunder or under any other Loan Document or the performance
or observance of any covenants, agreements or other terms or conditions set
forth herein or therein.  For purposes of determining compliance with
the conditions specified in Article VI, each Lender shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
written notice from such Lender prior to the proposed closing date specifying
its objection thereto.

         

        
          
            
            

          

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

         

         

         

        
          
            
            

          

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

         

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

         

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

         

         

         

        
          
            
            

          

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

         

        Section
11.08 No
Reliance.

         

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

         

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

         

         

        
          
            
            

          

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

        

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

          
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        ARTICLE
XII

        Miscellaneous

         

        Section
12.01 Notices.

         

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

         

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

         

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

         

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

         

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

         

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

         

        Section
12.02 Waivers;
Amendments.

         

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

         

        
          
            
            

          

          
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        (b) Neither
this Agreement nor any provision hereof nor any Security Instrument nor any
provision thereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Borrower and the Majority
Lenders or by the Borrower and the Administrative Agent with the consent of the
Majority Lenders; provided that no such agreement shall (i) increase the
Commitment or the Maximum Credit Amount of any Lender without the written
consent of such Lender, (ii) increase the Borrowing Base without the written
consent of all of the Lenders, decrease or maintain the Borrowing Base without
the consent of the Majority Lenders, or modify Section 2.07 in any manner
without the consent of each Lender, (iii) reduce the principal amount of any
Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any
fees payable hereunder, or reduce any other Indebtedness hereunder or under any
other Loan Document, without the written consent of each Lender affected
thereby, (iv) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or any other Indebtedness hereunder or under any other
Loan Document, or reduce the amount of, waive or excuse any such payment, or
postpone or extend the Termination Date without the written consent of each
Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (vi) waive or amend Section 3.04(c),
Section 6.01, Section 8.13, Section 10.02(c) or Section 12.14 or change the
definition of the terms “Foreign Subsidiary” or “Subsidiary”, without the
written consent of each Lender, (vii) release any Guarantor (except as set forth
in the Guaranty Agreement), release any of the collateral (other than as
provided in Section 11.10), or reduce the percentage set forth in Section
8.13(a) to less than 80%, without the written consent of each Lender, or (viii)
change any of the provisions of this Section 12.02(b) or the definitions of
“Majority Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
under any other Loan Documents or make any determination or grant any consent
hereunder or any other Loan Documents, without the written consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent or the Issuing Bank
hereunder or under any other Loan Document without the prior written consent of
the Administrative Agent or the Issuing Bank as the case may
be.  Notwithstanding the foregoing, any supplement to Schedule 7.14
(Subsidiaries) shall be effective simply by delivering to the Administrative
Agent a supplemental schedule clearly marked as such and, upon receipt, the
Administrative Agent will promptly deliver a copy thereof to the
Lenders.

         

        Section
12.03 Expenses, Indemnity; Damage
Waiver.

         

         

        
          
            
            

          

          
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          (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable costs, expenses, Taxes,
assessments and other charges incurred by the Administrative Agent or any Lender
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or
any other document referred to therein, (iii) all reasonable out-of-pocket
expenses incurred by the Administrative Agent in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder, (iv) all out of pocket expenses incurred by any
Administrative Agent, the Issuing Bank or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section 12.03, or in connection with the Loans
made or Letters of Credit issued hereunder, including, without limitation, all
such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

        

         

        (b) THE
BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE ARRANGER, THE ISSUING
BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS
(EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST,
AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS
OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE
EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE
PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF THE
BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY 

         

        
          
            
            

          

          
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        REFUSAL
BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF
THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY
WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER
ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF
THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii)
ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON ANY
OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY
SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY,
(xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION,
THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR
DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS MATERIALS ON ANY
OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY
ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR
AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

         

        
          
            
            

          

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

         

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

         

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

         

        Section
12.04 Successors and
Assigns.

         

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

         

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

         

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

         

         

        
          
            
            

          

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

        

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
            
            

          

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

         

        (c) 

         

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

         

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

         

        
          
            
            

          

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

         

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

         

        Section
12.05 Survival; Revival;
Reinstatement.

         

        (a) All
covenants, agreements, representations and warranties made by the Borrower
herein and in the certificates or other instruments delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Administrative
Agent, any other Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated.  The provisions of Section 5.01, Section 5.02, Section
5.03 and Section 12.03 and Article XI shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.

         

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

         

        
          Section
12.06 Counterparts; Integration;
Effectiveness.

        

         

        
          
            
            

          

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

         

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

         

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

         

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

         

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

         

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

           

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

        

         

        
          
            
            

          

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

         

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

         

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

         

        
          
            
            

          

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

         

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

         

        Section
12.12 Interest Rate
Limitation.  It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to
it.  Accordingly, if the transactions contemplated hereby would be
usurious as to any Lender under laws applicable to it (including the laws of the
United States of America and the State of Texas or any other jurisdiction whose
laws may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as
follows:  (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the 

         

        
          
            
            

          

          
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        Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the
Borrower).  All sums paid or agreed to be paid to any Lender for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable
law.  If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.  To the extent that Chapter 303 of the
Texas Finance Code is relevant for the purpose of determining the Highest Lawful
Rate applicable to a Lender, such Lender elects to determine the applicable rate
ceiling under such Chapter by the weekly ceiling from time to time in
effect.  Chapter 346 of the Texas Finance Code does not apply to the
Borrower’s obligations hereunder.

         

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

        

         

        
          
            
            

          

          
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        Section
12.14 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 Approved Counterparties to
any Swap Agreement with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries.  No
Approved Counterparty shall have any voting rights under any Loan Document as a
result of the existence of obligations owed to it under any such Swap
Agreements.

         

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

         

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

         

        Section
12.17 Intercreditor
Agreement.  Each Lender hereunder (a) agrees that it will be
bound by and will take no actions contrary to the provisions of the
Intercreditor Agreement and (b) authorizes and instructs the Administrative
Agent to enter into the Intercreditor Agreement as Collateral Agent and on
behalf of such Lender.

         

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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: 	Petro
      Resources Corporation	 
	 	 	 	 
	 	
                By:

              	
                /s/
      Wayne Hall

              	 
	 	
                Name:

              	
                Wayne
      Hall

              	 
	 	
                Title:

              	
                CEO

              	 

      

       

       

       

       

       

       

       

       

       

       

       

      
 

      
        
          
             

          

          
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        	 ADMINISTRATIVE
      AGENT:   	CIT
      Capital USA Inc.	 
	 	 as
      Administrative Agent	 
	 	 	 	 
	 	
                By:

              	
                /s/ George
    McKean

              	 
	 	
                Name:

              	
                George
      McKean

              	 
	 	
                Title:

              	
                Vice
      President

              	 
	 	 
      	 
      	 

      

      
         

         

         

         

         

         

         

         

         

         

         

        

      

       

      

      
        
          
             

          

          
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        	 LENDERS:  	CIT
      Capital USA Inc.	 
	 	 	 	 
	 	
                By:

              	
                /s/ George
    McKean

              	 
	 	
                Name:

              	
                George
      McKean

              	 
	 	
                Title:

              	
                Vice
      President

              	 
	 

      

        

         

         

         

         

         

         

         

         

         

         

         

        
    

      

      
 

      
        
          
             

          

          
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        	LENDERS:  	CIT
      Bank	 
	 	 	 	 
	 	
                By:

              	
                
                  /s/
      Daniel Burnett

                

              	 
	 	
                Name:

              	
                
                  Daniel
      Burnett

                

              	 
	 	
                Title:

              	
                
                  Authorized
      Signatory

                

              	 
	 

         

           

           

           

           

           

           

           

           

           

           

           

          
     

        

      
 

      -4-

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