Document:

Exhibit 4.4

                                  REAFFIRMATION

                            Dated as of June 9, 2006

     Reference is hereby made to the Amended and Restated  Second Lien Term Loan
Agreement,  dated as of June 9,  2006 (as the  same  may be  amended,  restated,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
by and among Quest  Cherokee,  LLC and Quest  Resource  Corporation as borrowers
(the "Borrowers"),  the financial institutions from time to time parties thereto
(the "Lenders") and Guggenheim  Corporate Funding,  LLC, as administrative agent
(the  "Administrative  Agent").  Capitalized  terms not otherwise defined herein
shall have the meaning ascribed thereto in the Credit Agreement.

     Each of the undersigned  reaffirms the terms and conditions of the Guaranty
and each other Loan Document executed by it and acknowledges and agrees that the
Guaranty and each other Loan  Document  executed by it remains in full force and
effect and is hereby ratified,  reaffirmed and confirmed.  Each reference to the
Credit Agreement contained in the Guaranty and each other Loan Document shall be
a reference to the Credit  Agreement as the same may from time to time hereafter
be amended, modified, supplemented or restated.

                                     *******

<PAGE>

     IN WITNESS WHEREOF, this Reaffirmation has been duly executed as of the day
and year first above written.

                                 J-W Gas Gathering, L.L.C.
                                 Ponderosa Gas Pipeline Company, Inc.
                                 Producers Service Incorporated
                                 Quest Energy Service, Inc.
                                 Quest Oil & Gas Corporation
                                 STP Cherokee, Inc.

                                 By:    /s/ Jerry D. Cash
                                        ------------------------------
                                 Name:  Jerry D. Cash
                                 Title: Chief Executive Officer

                                 Bluestem Pipeline, LLC
                                 By:  Quest Cherokee, LLC, its sole member

                                 By:    /s/ Jerry D. Cash
                                        ------------------------------
                                 Name:  Jerry D. Cash
                                 Title: Chief Executive Officer

                                 Quest Cherokee Oilfield Service, LLC
                                 By:  Quest Cherokee, LLC, its sole member

                                 By:    /s/ Jerry D. Cash
                                        ------------------------------
                                 Name:  Jerry D. Cash
                                 Title: Chief Executive OfficerEXECUTION COPY

                         THIRD LIEN TERM LOAN AGREEMENT

                                   DATED AS OF
                                  JUNE 9, 2006

                                      AMONG

                               QUEST CHEROKEE, LLC
                           QUEST RESOURCE CORPORATION,
                                  AS BORROWERS,

                       GUGGENHEIM CORPORATE FUNDING, LLC,
                            AS ADMINISTRATIVE AGENT,

                                       AND

                            THE LENDERS PARTY HERETO

                        LEAD ARRANGER AND SOLE BOOKRUNNER

                        GUGGENHEIM CORPORATE FUNDING, LLC

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I
                       Definitions and Accounting Matters

Section 1.01   Terms Defined Above.............................................1

Section 1.02   Certain Defined Terms...........................................1

Section 1.03   Terms Generally; Rules of Construction.........................19

Section 1.04   Accounting Terms and Determinations; GAAP......................20

                                   ARTICLE II
                                 The Term Loans

Section 2.01   Term Loans.....................................................20

Section 2.02   Loans..........................................................20

Section 2.03   Requests for the Loans.........................................21

Section 2.04   Funding the Loans..............................................21

Section 2.05   Termination....................................................22

Section 2.06   [RESERVED].....................................................22

Section 2.07   Intercreditor Agreement........................................22

                                   ARTICLE III
              Payments of Principal and Interest; Prepayments; Fees

Section 3.01   Repayment of the Loans.........................................22

Section 3.02   Interest.......................................................22

Section 3.03   Intercreditor Agreement........................................23

Section 3.04   Prepayments....................................................23

Section 3.05   Fees...........................................................24

                                   ARTICLE IV
                Payments; Pro Rata Treatment; Sharing of Set-offs

Section 4.01   Payments Generally; Pro Rata Treatment; Sharing of Set-offs....24

                                       i
<PAGE>

Section 4.02   Presumption of Payment by the Borrowers........................25

Section 4.03   Certain Deductions by the Administrative Agent.................25

Section 4.04   Disposition of Proceeds........................................26

                                    ARTICLE V
           Increased Costs; Break Funding Payments; Taxes; Illegality

Section 5.01   Increased Costs................................................26

Section 5.02   Break Funding Payments.........................................27

Section 5.03   Taxes..........................................................28

Section 5.04   Mitigation Obligations; Replacement of Lenders.................29

Section 5.05   Illegality.....................................................29

                                   ARTICLE VI
                              Conditions Precedent

Section 6.01   Effective Date.................................................30

Section 6.02   Each Credit Event..............................................32

                                   ARTICLE VII
                         Representations and Warranties

Section 7.01   Organization; Powers...........................................32

Section 7.02   Authority; Enforceability......................................32

Section 7.03   Approvals; No Conflicts........................................33

Section 7.04   Financial Condition; No Material Adverse Change................33

Section 7.05   Litigation.....................................................34

Section 7.06   Environmental Matters..........................................34

Section 7.07   Compliance with the Laws and Agreements; No Defaults...........35

Section 7.08   Investment Company Act.........................................36

Section 7.09   [Intentionally Omitted]

Section 7.10   Taxes..........................................................36

                                       ii
<PAGE>

Section 7.11   ERISA..........................................................36

Section 7.12   Disclosure; No Material Misstatements..........................37

Section 7.13   Insurance......................................................38

Section 7.14   Restriction on Liens...........................................38

Section 7.15   Subsidiaries...................................................38

Section 7.16   Location of Business and Offices...............................38

Section 7.17   Properties; Titles, Etc........................................38

Section 7.18   Maintenance of Properties......................................39

Section 7.19   Gas Imbalances, Prepayments....................................40

Section 7.20   Marketing of Production........................................40

Section 7.21   Swap Agreements................................................40

Section 7.22   Use of Proceeds................................................41

Section 7.23   Solvency.......................................................41

Section 7.24   Operating Expenses.............................................41

                                  ARTICLE VIII
                              Affirmative Covenants

Section 8.01   Financial Statements; Ratings Change; Other Information........42

Section 8.02   Notices of Material Events.....................................45

Section 8.03   Existence; Conduct of Business.................................45

Section 8.04   Payment of Obligations.........................................46

Section 8.05   Performance of Obligations under Loan Documents................46

Section 8.06   Operation and Maintenance of Properties........................46

Section 8.07   Insurance......................................................47

Section 8.08   Books and Records; Inspection Rights...........................47

Section 8.09   Compliance with Laws...........................................47

Section 8.10   Environmental Matters..........................................47

                                      iii
<PAGE>

Section 8.11   Further Assurances.............................................49

Section 8.12   Reserve Reports................................................49

Section 8.13   Title Information..............................................50

Section 8.14   Additional Collateral..........................................51

Section 8.15   ERISA Compliance...............................................52

Section 8.16   Swap Agreements................................................52

Section 8.17   Marketing Activities...........................................52

                                   ARTICLE IX
                               Negative Covenants

Section 9.01   Financial Covenants............................................53

Section 9.02   Debt...........................................................53

Section 9.03   Liens..........................................................55

Section 9.04   Dividends and Distributions....................................55

Section 9.05   Investments, Loans and Advances................................56

Section 9.06   Nature of Business; International Operations...................57

Section 9.07   Limitation on Leases...........................................57

Section 9.08   Proceeds of Notes..............................................57

Section 9.09   ERISA Compliance...............................................58

Section 9.10   Sale or Discount of Receivables................................59

Section 9.11   Mergers, Etc...................................................59

Section 9.12   Sale of Properties.............................................59

Section 9.13   Environmental Matters..........................................60

Section 9.14   Transactions with Affiliates...................................60

Section 9.15   Subsidiaries...................................................61

Section 9.16   Negative Pledge Agreements; Dividend Restrictions..............61

Section 9.17   Gas Imbalances, Take-or-Pay or Other Prepayments...............61

                                       iv
<PAGE>

Section 9.18   Swap Agreements................................................61

                                    ARTICLE X
                           Events of Default; Remedies

Section 10.01  Events of Default..............................................62

Section 10.02  Remedies.......................................................64

                                   ARTICLE XI
                            The Administrative Agent

Section 11.01  Appointment; Powers............................................65

Section 11.02  Duties and Obligations of Administrative Agent.................65

Section 11.03  Action by Administrative Agent.................................66

Section 11.04  Reliance by Administrative Agent...............................66

Section 11.05  Subagents......................................................67

Section 11.06  Resignation or Removal of Administrative Agent.................67

Section 11.07  Administrative Agent as a Lender...............................67

Section 11.08  No Reliance....................................................68

Section 11.09  Authority of Administrative Agent to Release
               Collateral and Liens...........................................68

Section 11.10  The Arranger...................................................68

                                   ARTICLE XII
                                  Miscellaneous

Section 12.01  Notices........................................................69

Section 12.02  Waivers; Amendments............................................69

Section 12.03  Expenses, Indemnity; Damage Waiver.............................70

Section 12.04  Successors and Assigns.........................................73

Section 12.05  Survival; Revival; Reinstatement...............................76

Section 12.06  Counterparts; Integration; Effectiveness.......................77

                                       v
<PAGE>

Section 12.07  Severability...................................................77

Section 12.08  Right of Setoff................................................77

Section 12.09  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.....78

Section 12.10  Headings.......................................................79

Section 12.11  Confidentiality................................................79

Section 12.12  Interest Rate Limitation.......................................80

Section 12.13  EXCULPATION PROVISIONS.........................................81

Section 12.14  Collateral Matters; Swap Agreements............................81

Section 12.15  No Third Party Beneficiaries...................................81

Section 12.16  USA Patriot Act Notice.........................................82

                                       vi
<PAGE>

                         ANNEXES, EXHIBITS AND SCHEDULES

Annex I.         Commitments

Exhibit A        Form of Note
Exhibit B        Form of Borrowing Request
Exhibit C        Form of Compliance Certificate
Exhibit D-1      Form of Legal Opinion of Special Counsel to the Borrower
Exhibit D-2      Form of Legal Opinion of Local Counsel
Exhibit E-1      Security Instruments
Exhibit E-2      Form of Guaranty Agreement
Exhibit E-3      Form of Security Agreement
Exhibit E-4      Form of Intercreditor Agreement
Exhibit F        Form of Assignment and Assumption

Schedule 7.03    Approvals
Schedule 7.05    Litigation
Schedule 7.14    Liens
Schedule 7.15    Subsidiaries
Schedule 7.19    Gas Imbalances
Schedule 7.20    Marketing Contracts
Schedule 7.21    Swap Agreements
Schedule 9.05    Investments

                                      vii
<PAGE>

        THIS THIRD LIEN TERM LOAN AGREEMENT  dated as of June 9, 2006, is among:
Quest Cherokee,  LLC  ("Cherokee") a limited  liability  company duly formed and
existing  under  the  laws  of  the  State  of  Delaware,   and  Quest  Resource
Corporation,  a corporation duly formed and existing under the laws of the State
of Nevada (the "Company" and, collectively with Cherokee, the "Borrowers"); each
of the Lenders from time to time party hereto; and Guggenheim Corporate Funding,
LLC (in its individual capacity,  "Guggenheim"), 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 Borrowers have  requested that the Lenders  provide one or more
term  loans to the  Borrowers  having  an  aggregate  principal  amount of up to
$75,000,000;  and the Lenders  have agreed to do so on the terms and  conditions
hereinafter set forth;

        B.    Therefore,  for  and in  consideration  of  the  mutual  covenants
and agreements herein contained and other good and valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Borrowers,  the
Administrative Agent and the Lenders, hereby 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:

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

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

        "Affiliate"  of any  Person  shall  mean  (i)  any  Person  directly  or
indirectly  controlled  by,  controlling or under common control with such first
Person,  (ii) any  director  or officer  of such  first  Person or of any Person
referred  to in clause  (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose  principal  beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled  by any such member or trust.  For purposes of this  definition,  any
Person which owns directly or indirectly  10% or more of the  securities  having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the  partnership or other  ownership  interests of
any other Person (other than as a limited  partner of such other Person) will be
deemed to

<PAGE>

"control" (including, with its correlative meanings,  "controlled by" and "under
common control with") such corporation or other Person.

        "Agreement"  means  this  Amended  and  Restated  Second  Lien Term Loan
Agreement, as the same may from time to time be amended, modified,  supplemented
or restated.

        "Applicable Margin" means a rate per annum equal to 8.00%.

        "Approved  Counterparty"  means (a) any  revolving  lender  party to the
Senior Credit  Agreement or any Affiliate of such lender or (b) any other Person
approved  by the  Administrative  Agent whose long term  senior  unsecured  debt
rating  is A/A2 by S&P or  Moody's  (or their  equivalent)  or higher or (c) any
other Person whose obligations under a Swap Agreement are guaranteed by a Person
whose long term senior unsecured debt rating is A/A2 by S&P or Moody's (or their
equivalent  or higher) or (d) any other  Person  approved by the  Administrative
Agent.

        "Approved  Fund" means any Person (other than a natural  person) that is
engaged in making,  purchasing,  holding or  investing in bank loans and similar
extensions  of  credit  in the  ordinary  course  of its  business  and  that is
administered or managed by (a) a Lender,  (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

        "Approved Petroleum Engineers" means Cawley Gillespie & Associates, Inc.
or  any  other  independent   petroleum  engineers  selected  by  Borrowers  and
reasonably acceptable to the Administrative Agent.

        "ArcLight Notes" means those certain promissory notes of Cherokee in the
original principal amount of $66 million payable to the order of Cherokee Energy
Partners, LLC.

        "ArcLight  Transaction"  means the purchase by certain of the  Company's
Subsidiaries  of all of the  outstanding  Class A Units  of  Cherokee  owned  by
Cherokee  Energy  Partners  LLC and the  repayment  by Cherokee of the  ArcLight
Notes.

        "Arranger" means Guggenheim  Corporate Funding,  LLC, in its capacity as
the 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(b)),  and accepted by the Administrative Agent, in the
form of Exhibit F or any other form approved by the Administrative Agent.

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

        "Board of Directors" means, with respect to any Person,  (i) in the case
of any  corporation,  the board of  directors,  (ii) in the case of any  limited
liability company, the

                                       2
<PAGE>

board of managers, (iii) in the case of any partnership,  the board of directors
of the general partner and (iv) in any other case, the functional  equivalent of
the forgoing.

         "Borrowing  Request"  means a request by the  Borrower for the Loans 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 The City of New York are authorized or required by
law or  executive  order to  close;  and if such day  relates  to a  payment  or
prepayment of principal of or interest on, or the Interest Period for, a Loan or
a notice  by the  Borrower  with  respect  to any such  payment,  prepayment  or
Interest  Period,  any day  which  is also a day on  which  dealings  in  Dollar
deposits are carried out in the London interbank market.

        "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  Equivalent" means cash held in dollars and all Investments of the
type identified in Section 9.05(c) through 9.05(f) inclusive.

        "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  Borrowers  or  any  of  their
Subsidiaries having a fair market value in excess of $1,000,000.

        "Change in Control" means (a) the acquisition of ownership,  directly or
indirectly,  beneficially  or of  record,  by any  Person or group  (within  the
meaning  of the  Securities  Exchange  Act of  1934  and  the  rules  of the SEC
thereunder as in effect on the date thereof),  of Equity Interests  representing
more than 35% of the aggregate  ordinary voting power  represented by the issued
and  outstanding  Equity  Interests of either  Borrower,  or (b) occupation of a
majority of the seats  (other than vacant  seats) on the Board of  Directors  of
either  Borrower  by Persons  who were  neither  (i)  nominated  by the Board of
Directors of such Borrower nor (ii) appointed by the directors so nominated.

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

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

        "Commitment"  means, with respect to each Lender, the commitment of such
Lender to make a Loan  hereunder on the Effective  Date,  expressed as an amount

                                       3
<PAGE>

representing  the  principal  amount  of the  Loan to be  made  by  such  Lender
hereunder and "Commitments" means the aggregate amount of the Commitments of all
Lenders.  The amount of each  Lender's  Commitment  is set forth on Annex I. The
aggregate amount of the Lenders' Commitments is $75,000,000.

        "Consolidated  Net Income" means with respect to the Borrowers and their
Consolidated  Subsidiaries,  for any period, the aggregate of the net income (or
loss) of the Borrowers and their 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 either  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 such  Borrower  and the  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
such  Borrower  or  Consolidated  Subsidiary,  as the case  may be;  (b) the net
income(or loss) during such period of any Consolidated  Subsidiary to the extent
that the  declaration  or  payment of  dividends  or  similar  distributions  or
transfers or loans by that Consolidated  Subsidiary is not at the time permitted
by  operation  of the  terms of its  charter  or any  agreement,  instrument  or
Governmental  Requirement  applicable  to  such  Consolidated  Subsidiary  or is
otherwise  restricted or prohibited,  in each case determined in accordance with
GAAP; (c) any extraordinary non-cash gains or losses during such period; and (d)
any gains or losses  attributable  to  writeups  or  writedowns  of assets;  and
provided  further that if either 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,
merger  or  disposition,  as if such  acquisition,  merger  or  disposition  had
occurred on the first day of such period.

        "Consolidated  Subsidiaries"  means each  Subsidiary of either  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 such Borrower in accordance with GAAP.

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

        "Debt"  means,  for  any  Person,  the  sum  of the  following  (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances,  debentures,  notes or other similar instruments
(including  principal and due but unpaid  interest  fees and  charges);  (b) all
obligations  of such Person  (whether  contingent  or  otherwise)  in respect of
bankers'  acceptances,  letters of  credit,  surety or

                                       4
<PAGE>

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  (excluding  trade  accounts  payable and
accrued obligations  incurred in the ordinary course of business on normal trade
terms that are not past due by more than ninety (90)  days);  (d) the  principal
portion of all obligations  under Capital Leases;  (e) the principal  portion of
all obligations  under Synthetic  Leases;  (f) all Debt (as defined in the other
clauses of this  definition) and other  obligations 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 but limited to the fair market value of such Property;
(g) all Debt (as  defined  in the other  clauses of this  definition)  and other
obligations  of  others  guaranteed  by such  Person  or in  which  such  Person
otherwise  assures a creditor  against loss of the Debt or obligations of others
(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  (excluding  obligations to purchase  equipment or
inventory in the ordinary  course of business)  of others;  (i)  obligations  to
deliver  commodities,   goods  or  services,   including,   without  limitation,
Hydrocarbons,  in consideration of one or more advance payments,  other than gas
balancing  arrangements in the ordinary  course of business;  (j) obligations to
pay for goods or  services  whether or not such goods or services  are  actually
received  or  utilized  by such Person  (excluding  trade  accounts  payable and
accrued obligations  incurred in the ordinary course of business on normal trade
terms that are not past due by more than ninety (90) days);  (k) any Debt of any
entity (including for purposes of this clause (k), 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;  and (m) the  undischarged  balance of any production  payment created by
such  Person or for the  creation of which such  Person  directly or  indirectly
received  payment.  The Debt of any Person shall include all obligations of such
Person of the  character  described  above to the  extent  such  Person  remains
legally liable in respect  thereof  notwithstanding  that any such obligation is
not included as a liability of such Person under GAAP.

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

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

                                       5
<PAGE>

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

        "EBITDA" means,  for any period,  the sum of Consolidated Net Income for
such period plus the following  expenses or charges to the extent  deducted from
Consolidated Net Income in such period:  interest,  income taxes,  depreciation,
depletion,  amortization and other noncash charges (including  unrealized losses
on Swap  Agreements),  plus costs and expenses  directly  incurred in connection
with  the  Transactions   and  including  the  Equity  Offering,   the  ArcLight
Transaction  and  any  write-off  of  transaction   closing  costs  relating  to
Cherokee's  prior credit  facility  with UBS, AG,  Stamford  Branch and ArcLight
Notes, minus all noncash income (including  unrealized gains on Swap Agreements)
added to Consolidated Net Income.

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

        "Environmental  Laws"  means  any  and  all  Governmental   Requirements
pertaining in any way to health,  safety, the environment or the preservation or
reclamation  of natural  resources,  in effect in any and all  jurisdictions  in
which  either  Borrower  or any  Subsidiary  is  conducting  or at any  time has
conducted  business,  or where any Property of either 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 Act, as amended,
and other environmental  conservation or protection  Governmental  Requirements.
The term "oil" shall have the meaning  specified  in OPA,  the terms  "hazardous
substance" and "release" (or "threatened  release") have the meanings  specified
in CERCLA,  and the terms "oil and gas waste" "solid waste" and  "disposal"  (or
"disposed") have the meanings  specified in RCRA or applicable state counterpart
environmental laws; provided, however, that (a) in the event either OPA, CERCLA,
RCRA or any such applicable state counterpart environmental law 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 either
Borrowers 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 any such applicable
state counterpart environmental law, such broader meaning shall apply.

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

                                       6
<PAGE>

        "Equity  Offering" means the issuance of Equity  Interests that occurred
on November 14, 2005.

        "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 either  Borrower or any Subsidiary of either
Borrower would be deemed to be a "single employer" within the meaning of section
4001(b)(1)  of ERISA or  subsection  (b),  (c), (m) or (o) of section 414 of the
Code.

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

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

        "Excepted  Liens"  means:  (a) Liens  for  Taxes,  assessments  or other
governmental  charges  or  levies  which are not  delinquent  or which are being
contested in good faith by appropriate  action and for which  adequate  reserves
have been  maintained in  accordance  with GAAP;  (b) Liens in  connection  with
workers' compensation,  unemployment insurance or other social security, old age
pension or public  liability  obligations  which are not delinquent or which are
being  contested  in good faith by  appropriate  action  and for which  adequate
reserves have been maintained in accordance with GAAP; (c) statutory  landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation  of law  in  the  ordinary  course  of  business  or  incident  to the
exploration,  development,  operation and  maintenance of Oil and Gas Properties
each of which is in respect of obligations  that are not delinquent or which are
being  contested  in good faith by  appropriate  action  and for which  adequate
reserves have been  maintained in accordance  with GAAP; (d)  contractual  Liens
which  arise  in the  ordinary  course  of  business  and  which  do not  secure
obligations  for  borrowed  money  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 physical
exchange of oil and  natural  gas,  unitization  and  pooling  declarations  and
agreements, area of mutual interest agreements,  royalty agreements,  overriding
royalty agreements,  marketing agreements,  processing  agreements,  net profits
agreements,   development  agreements,  gas  balancing  or  deferred  production
agreements,  injection,  repressuring  and recycling  agreements,  salt water or
other disposal  agreements,  seismic or other geophysical permits or agreements,
and other  agreements  which are usual and

                                       7
<PAGE>

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 either Borrower or any Subsidiary or materially  impair
the value of such Property subject  thereto;  (e) Liens arising solely by virtue
of any  statutory,  common law  provisions  or  contractual  Liens  contained in
standard  deposit  account  agreements  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
the  Borrowers  or  any of  their  Subsidiaries  to  provide  collateral  to the
depository  institution;  (f)  easements,  restrictions,   servitudes,  permits,
conditions,  covenants,  exceptions  or  reservations  in any Property of either
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 such  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, insurance premiums 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.

        "Excluded Taxes" means,  with respect to the  Administrative  Agent, any
Lender, or any other recipient of any payment to be made by or on account of any
obligation of either 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 either  Borrower or
any Guarantor is located and (c) in the case of a Foreign  Lender (other than an
assignee  pursuant to a request by either Borrower under Section  5.04(b)),  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

                                       8
<PAGE>

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.

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

        "Fee Letter" shall mean that certain letter agreement between Guggenheim
and the Borrowers dated June 9, 2006, concerning certain fees in connection with
this  Agreement  and  any  agreements  or  instruments  executed  in  connection
therewith, as the same may be amended or replaced from time to time.

        "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 of the Borrower.

        "Financial  Statements"  means the financial  statement or statements of
the Company 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 either 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.

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

        "Gas  Balancing  Obligations"  means  those  obligations  set  forth  on
Schedule 7.19.

        "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 either Borrower,  any Subsidiary,  any of their Properties,  the
Administrative Agent or any Lender.

        "Governmental  Requirement"  means any applicable  law,  statute,  code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise,  permit,  certificate,  license,  authorization or other directive or
requirement,   whether  now  or  hereinafter  in  effect,   including,   without
limitation,  Environmental Laws, energy

                                       9
<PAGE>

regulations and  occupational,  safety and health standards or controls,  of any
Governmental Authority.

        "Guarantors"  means,  collectively as of the Effective Date, each of the
following:  STP  Cherokee,  Inc.,  Quest  Oil & Gas  Corporation,  Quest  Energy
Service,   Inc.,  Ponderosa  Gas  Pipeline  Company,  Inc.,  Producers  Service,
Incorporated,  J-W Gas Gathering, LLC, Bluestem Pipeline, LLC and Quest Cherokee
Oilfield Service, LLC, and any future Subsidiaries of either Borrower.

        "Guaranty  Agreement"  means an agreement  executed by the Guarantors in
substantially the form of Exhibit F-2 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.

        "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 its Loans, 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, coal bed methane 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 either
Borrower or any  Guarantor (a) to the  Administrative  Agent or any Lender under
any Loan  Document and (b) to any lender or any  Affiliate of a lender under any
Swap  Agreement  between  either  Borrower or any  Subsidiary and such lender or
Affiliate  of a lender while such Person (or in the case of its  Affiliate,  the
Person  affiliated  therewith)  is a  lender  thereunder,  (c) to  any  Approved
Counterparty under any Swap Agreement to which either Borrower or any Subsidiary
is a party if such Swap  Agreement by its terms states that it is secured by the
Security Instruments and (d) all renewals,  extensions and/or  rearrangements of
any of the above.

        "Indemnitee"  shall  have the  meaning  assigned  such  term in  Section
12.03(b).

        "Indemnity Matters" shall mean any and all actions,  suits,  proceedings
(including any  investigations,  litigation or inquiries),  claims,  demands and
causes  of  action  made or  threatened  against  a Person  and,  in  connection
therewith,  all losses,  liabilities,  damages

                                       10
<PAGE>

(including,  without limitation,  consequential damages) or reasonable costs and
expenses of any kind or nature whatsoever incurred by such Person whether caused
by the sole or concurrent negligence of such Person seeking indemnification.

        "Indemnified Taxes" means Taxes other than Excluded Taxes.

        "Initial  Reserve  Report"  means the report  prepared  by the  Approved
Petroleum  Engineers  with  respect to  certain  Oil and Gas  Properties  of the
Borrowers and their  Subsidiaries  as of April 1, 2006, a copy of which has been
delivered to the Administrative Agent.

        "Intercreditor   Agreement"   means  the  Second  Amended  and  Restated
Intercreditor Agreement among the Administrative Agent, the administrative agent
under the  Senior  Credit  Agreement,  and the Second  Lien Term Loan  Agreement
administrative   agent,   substantially  in  the  form  of  Exhibit  E-4  or  an
intercreditor  agreement  substantially  similar entered into in connection with
Permitted Refinancing Debt.

        "Interest  Payment  Date"  means,  with  respect  to any Loan,  the date
immediately  following the last day of each Interest  Period  applicable to such
Loan,  provided that if any Interest Payment Date would fall on a day other than
a Business Day, such Interest Payment Date shall be the next succeeding Business
Day unless such next  succeeding  Business  Day would fall in the next  calendar
month,  in which case such Interest  Payment Date shall be on the next preceding
Business Day.

        "Interest   Period"  means,  with  respect  to  each  Loan,  the  period
commencing on and including the Effective Date or the numerically  corresponding
day in any month, as applicable,  and ending on, but excluding,  the numerically
corresponding  day in the  immediately  succeeding  month.  Notwithstanding  the
foregoing:  (i) no Interest  Period may end after the Maturity  Date;  (ii) each
Interest  Period which would  otherwise end on a day which is not a Business Day
shall end on the next  succeeding  Business  Day (or,  if such  next  succeeding
Business Day falls in the next succeeding  calendar month, on the next preceding
Business Day);  and (iii) no Interest  Period shall have a duration of less than
one month.

        "Investment"  means,  for any Person:  (a) the acquisition  (whether for
cash, Property,  services or securities or otherwise) of Equity Interests of 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);  (b) the
making of any deposit  with, or advance,  loan or other  extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an  understanding  or  agreement,  contingent  or  otherwise,  to resell such
Property to such Person,  but excluding  any such advance,  loan or extension of
credit having a term not exceeding  ninety (90) days  representing  the purchase
price of  inventory or supplies  sold by such Person in the  ordinary  course of
business)  or (c) the entering  into of any  guarantee  of, or other  contingent
obligation  with respect to, Debt of any other Person and (without  duplication)
any amount committed to be advanced, lent or extended to such Person.

                                       11
<PAGE>

        "Knowledge"  means,  with  respect to an  individual,  his or her actual
knowledge  and with  respect  to any  corporation,  limited  liability  company,
partnership  or other  business  entity,  the actual  knowledge of any executive
officer,  general  partner  or  individual  being  a  member  of  the  executive
management of such entity.

        "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.

        "LIBO Rate" means, with respect to any Loan for any Interest Period, the
rate per annum (rounded  upwards,  if necessary,  to the nearest  1/100th of 1%)
equal to the average of the offered quotations for 30-day LIBO appearing on Page
3750 of the Dow Jones Market Service (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.  In the event that such
rate is not  available  at such time for any  reason,  then the "LIBO Rate" with
respect  to such  Loan  for such  Interest  Period  shall be the rate per  annum
(rounded  upwards,  if  necessary,   to  the  next  1/100th  of  1%)  quoted  by
Administrative  Agent at or before 11:00 a.m.,  New York,  New York time (or, as
soon thereafter as  practicable),  two (2) Business Days before the first day of
such Interest Period,  to be the arithmetic  average of the prevailing rates per
annum at the time of  determination  and in  accordance  with the then  existing
practice in the applicable market,  for the offering to Administrative  Agent by
one or more prime banks selected by Administrative Agent in its sole discretion,
in the London interbank market, of deposits in dollars for delivery on the first
day of such Interest  Period and having a maturity  equal (or as nearly equal as
may be) to the  length of such  Interest  Period  and in an amount  equal (or as
nearly equal as may be) to the Loans to which such Interest Period relates. Each
determination by  Administrative  Agent of the LIBO Rate shall be conclusive and
binding,  absent  manifest  error,  and may be  computed  using  any  reasonable
averaging and attribution method.

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

                                       12
<PAGE>

        "Loan" means the term loan made by each Lender to the Borrowers pursuant
to this Agreement.

        "Loan  Documents" means this Agreement,  the Notes, the Fee Letter,  the
Security Instruments and the Intercreditor Agreement.

        "Majority  Lenders"  means the  Administrative  Agent and Lenders having
Loans  representing at least a majority of the outstanding  principal  amount of
the Loans (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)).

        "Material  Adverse  Effect" means a material  adverse  effect on (a) the
business, operations,  Property, condition (financial or otherwise) or prospects
of each of the Borrowers and its Subsidiaries  taken as a whole, (b) the ability
of either  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 or any Lender under any Loan Document.

        "Material   Indebtedness"   means  Debt  (other  than  the  Loans),   or
obligations in respect of one or more Swap Agreements, of any one or more of the
Borrowers and their  Subsidiaries  in an aggregate  principal  amount  exceeding
$2,500,000.  For purposes of determining Material  Indebtedness,  the "principal
amount" of the  obligations  of a Borrower or any  Subsidiary  in respect of any
Swap Agreement at any time shall be the maximum  aggregate amount (giving effect
to any  netting  agreements)  that such  Borrower  or such  Subsidiary  would be
required to pay if such Swap Agreement were terminated at such time.

        "Maturity Date" means June 9, 2012.

        "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 either 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 Cash  Proceeds"  means (a) in connection  with any asset sale,  the
proceeds  thereof in the form of cash and Cash  Equivalents  (including any such
proceeds received by way of deferred payment of principal  pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only  as and  when  received)  of  such  asset  sale,  net of  attorneys'  fees,
accountants' fees,  investment banking fees,  broker's or finder's fees, amounts
required  to be  applied  to the  repayment  of  Indebtedness  secured by a Lien
expressly  permitted  hereunder  on any asset that is the  subject of such asset
sale (other than any Lien pursuant to a Security Instrument) and other customary
fees and expenses  actually  incurred in  connection  therewith and net of

                                       13
<PAGE>

taxes paid or  reasonably  estimated  to be payable as a result  thereof  (after
taking into  account any  available  tax credits or  deductions  related to such
asset sale and any tax  sharing  arrangements)  and (b) in  connection  with any
issuance or sale of equity  securities or debt  securities or instruments or the
incurrence  of  loans,  the  cash  proceeds   received  from  such  issuance  or
incurrence,  net of attorneys' fees, investment banking fees, accountants' fees,
underwriting  discounts and  commissions  and other  customary fees and expenses
actually incurred in connection therewith.

        "Notes"  means the  promissory  notes of the Borrowers as requested by a
Lender and described in Section 2.02(b) 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 hereinafter acquired and situated upon,
used,  held for use or useful  in  connection  with the  operating,  working  or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs,  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. The term Oil and Gas
Properties shall not include the Pipeline.

        "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  to  such  term  in  Section
12.04(c)(i).

                                       14
<PAGE>

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

        "Percentage  Share" means with respect to any Lender,  the percentage of
the  aggregate  Commitments  represented  by such  Lender's  Commitment  as such
percentage  is set forth on Annex I as such amount may be  adjusted  pursuant to
any Assignment and Assumption under Section 12.04.

        "Permitted   Refinancing   Debt"  means  Debt  (for   purposes  of  this
definition,  "new Debt") incurred in exchange for, or proceeds of which are used
to refinance,  all of any other Debt (the "Refinanced Debt");  provided that (a)
such new Debt is in an  aggregate  principal  amount not in excess of the sum of
(i) the aggregate  principal amount then outstanding of the Refinanced Debt (or,
if the  Refinanced  Debt is  exchanged  or acquired  for an amount less than the
principal   amount  thereof  to  be  due  and  payable  upon  a  declaration  of
acceleration  thereof,  such lesser amount) and (ii) an amount  necessary to pay
any  fees  and  expenses,  including  premiums,  related  to  such  exchange  or
refinancing;  (b) such new Debt has a stated maturity no earlier than the stated
maturity of the Refinanced  Debt and an average life no shorter than the average
life of the Refinanced  Debt; (c) such new Debt does not have a stated  interest
rate in excess of the stated interest rate of the Refinanced  Debt; (d) such new
Debt does not contain any covenants  which are more onerous to the Borrowers and
their  Subsidiaries  than those imposed by the Refinanced  Debt and (e) such new
Debt (and any  guarantees  thereof) is  subordinated  in right of payment to the
Indebtedness  (or, if applicable,  the Guaranty  Agreement) to at least the same
extent as the Refinanced Debt.

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

        "Pipeline"  means the pipeline owned and operated by Bluestem  Pipeline,
LLC.

        "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 either  Borrowers,  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 such Borrower or a Subsidiary or an
ERISA Affiliate.

        "Property" means any interest in any kind of property or asset,  whether
real,  personal  or  mixed,  or  tangible  or  intangible,   including,  without
limitation, cash, securities, accounts and contract rights.
        "Proved Mineral Interests" means, collectively, Proved Producing Mineral
Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped Mineral
Interests.

        "Proved Nonproducing Mineral Interests" means all Hydrocarbon  Interests
which  constitute  proved developed  nonproducing  reserves as classified by the
Society of Petroleum Engineers.

                                       15
<PAGE>

        "Proved  Producing  Mineral  Interests" means all Hydrocarbon  Interests
which  constitute  proved  developed  producing  reserves as  classified  by the
Society of Petroleum Engineers.

        "Proved Undeveloped  Mineral Interests" means all Hydrocarbon  Interests
which  constitute  proved  undeveloped  reserves as classified by the Society of
Petroleum Engineers.

        "PV-10 Value" shall mean, as of any date of  determination,  the present
value of future  cash flows from  Proved  Mineral  Interests  on the  Borrowers'
Hydrocarbon  Interests as set forth in the most recent Reserve Report  delivered
pursuant to Section 8.12,  utilizing the Three-Year  Strip Price for natural gas
(Henry Hub), quoted in the New York Mercantile  Exchange (or its successor),  as
of the date as of which  the  information  set forth in such  Reserve  Report is
provided  (as  adjusted for basis  differentials)  and  utilizing a 10% discount
rate.  PV-10 Value shall be  adjusted  to give effect to the  commodity  hedging
agreements of the Borrowers then in effect.

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

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

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

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

        "Remedial Work" has the meaning assigned such term in Section 8.10(a).

        "Reserve  Report" means the Initial Reserve Report and each other report
setting  forth,  as of each December 31st or June 30th (or such other  specified
"as of"  date  contemplated  by  Section  8.12(d)),  the  oil  and gas  reserves
attributable  to  the  Oil  and  Gas  Properties  of  the  Borrowers  and  their
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, consistent with SEC reporting  requirements at the time
and reflecting (and conforming to the definition of) PV-10 Value,  provided that
each  such  report  hereafter  delivered  must (a)  separately  report on Proved
Mineral  Interests,  Proved Producing  Mineral  Interests,  Proved  Nonproducing
Mineral  Interests  and Proved  Undeveloped  Mineral  Interests  and  separately
calculate the PV-10 Value of each such category of Proved Mineral  Interests for
the  Borrowers'  and their  Subsidiaries'  interests,  (b) take into account the
Borrowers' actual experiences with leasehold  operating expenses and other costs
in  determining  projected  leasehold  operating  expenses and other

                                       16
<PAGE>

costs,   (c)   identify   and  take  into   account   any   "over-produced"   or
"under-produced"  status  under  gas  balancing  arrangements,  and (d)  contain
information  and analysis  comparable in scope to that  contained in the Initial
Reserve Report.

        "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 either Borrower.

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

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

        "Second  Lien  Term Loan  Agreement"  means  that  certain  Amended  and
Restated Second Lien Term Loan Credit Agreement among the Borrowers, Guggenheim,
as the second lien administrative  agent, and the lenders party thereto, and any
"Loan Documents" (as defined therein) executed in connection therewith,  in each
case, as hereafter amended or supplemented.

         "Secured Parties" has the meaning assigned to such term in the Security
Agreement.

        "Security  Agreement"  means an agreement  executed by the Borrowers and
the  Guarantors  in  substantially  the  form of  Exhibit  F, as the same may be
amended, restated, modified or supplemented from time to time.

        "Security  Instruments"  means  the  Guaranty  Agreement,  the  Security
Agreement,  mortgages,  deeds of trust  and  other  agreements,  instruments  or
certificates  described  or  referred to in Exhibit  F-1,  and any and all other
agreements,  instruments or certificates now or hereafter executed and delivered
by the  Borrowers or any other Person (other than Swap  Agreements  constituting
Indebtedness 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,  any  Notes  or this  Agreement,  as such  agreements  may be
amended, modified, supplemented or restated from time to time.

        "Senior Credit Agreement" means that certain Amended and Restated Senior
Credit  Agreement  dated as of February 7, 2006 among the Borrowers,  Guggenheim
Corporate Funding,  LLC, as administrative agent for the revolving lenders party
thereto and the other  agents and  revolving  lenders  from time to time parties
thereto and any "Loan  Documents"  (as defined  therein)  executed in connection
therewith, in each case, as

                                       17
<PAGE>

hereafter amended or supplemented from time to time,  subject to Section 9.03(g)
and Section 9.02(h).

        "S&P"  means  Standard & Poor's  Ratings  Services,  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 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. 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 such
reserve percentage.

        "Subsidiary"  means:  (a) any Person of which at least a majority of the
outstanding  Equity  Interests having by the terms thereof ordinary voting power
to elect a majority of the Board of  Directors or 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 Borrowers or one or more of their  respective  Subsidiaries
or by the Borrowers and/or one or more of their respective  Subsidiaries and (b)
any partnership of which the Borrowers or any of their  respective  Subsidiaries
is a general partner.  Unless otherwise  indicated herein, each reference to the
term "Subsidiary" shall mean a Subsidiary of one of the Borrowers.

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

        "Synthetic  Leases"  means,  in respect of any Person,  all leases which
shall have  been,  or should  have been,  in  accordance  with GAAP,  treated as
operating  leases on the  financial  statements  of the Person  liable  (whether
contingently  or otherwise)  for the payment of rent  thereunder  and which were
properly treated as indebtedness for borrowed money for purposes of U.S. federal
income taxes,  if the lessee in respect

                                       18
<PAGE>

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.

        "Three-Year  Strip Price" shall mean,  as of any date of  determination,
(a) for the 36-month period commencing with the month immediately  following the
month in which the date of  determination  occurs,  the monthly futures contract
prices for crude oil and natural gas for the 36  succeeding  months as quoted on
the  applicable   commodities  exchange  or  other  price  quotation  source  as
contemplated  in the  definition of "PV-10 Value" and (b) for periods after such
36-month  period,  the  average of such  quoted  prices for the period  from and
including the 25th month in such 36-month  period through the 36th month in such
period.

        "Total Debt" means,  at any date, all Debt (exclusive of Debt related to
Swap Agreements) of either of the Borrowers and its Consolidated Subsidiaries on
a consolidated basis, less (i) Cash Equivalents,  (ii) undrawn letters of credit
issued for the  account of such  Borrower  and/or any of its  Subsidiaries,  and
(iii) surety bonds permitted under Section 9.02(e).

         "Transactions" means, with respect to (a) each Borrower, the execution,
delivery and  performance by such Borrower of this Agreement and each other Loan
Document, the borrowing of Loans, the use of the proceeds thereof, and the grant
of Liens by such 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 Agreement, and the grant of Liens
by such Guarantor on Mortgaged  Properties and other Properties  pursuant to the
Security Instruments.

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

        Section 1.03 Terms Generally; Rules of Construction.  The definitions of
terms herein  shall apply  equally to the singular and plural forms of the terms
defined.  Whenever  the  context may  require,  any  pronoun  shall  include the
corresponding  masculine,  feminine  and  neuter  forms.  The  words  "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation".  The word "will"  shall be  construed  to have the same meaning and
effect as the word  "shall".  Unless  the  context  requires  otherwise  (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement,  instrument or other

                                       19
<PAGE>

document  as from  time to time  amended,  supplemented  or  otherwise  modified
(subject to any  restrictions on such  amendments,  supplements or modifications
set forth  herein),  (b) any  reference  herein to any law shall be construed as
referring to such law as amended,  modified,  codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person's  successors and assigns  (subject to
the  restrictions  contained  herein),  (d) the  words  "herein",  "hereof"  and
"hereunder",  and words of similar  import,  shall be construed to refer to this
Agreement in its entirety and not to any particular  provision hereof,  (e) with
respect to the determination of any time period, the word "from" means "from and
including"  and the word "to"  means "to and  including"  and (f) any  reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes,  Exhibits and  Schedules  to,
this Agreement.  No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

        Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise
specified  herein,  all accounting  terms used herein shall be interpreted,  all
determinations  with respect to accounting  matters hereunder shall be made, and
all financial  statements and certificates  and reports as to financial  matters
required to be furnished to the  Administrative  Agent or the Lenders  hereunder
shall be prepared,  in accordance with GAAP,  applied on a basis consistent with
the  Financial  Statements  except for changes in which  Borrower's  independent
registered   public   accounting   firm  concurs  and  which  are  disclosed  to
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 Borrowers 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 Term Loans

        Section 2.01 Term Loans.  Subject to the terms and  conditions set forth
herein, each Lender severally agrees to make on the Effective Date a Loan to the
Borrowers in a principal amount equal to the amount of such Lender's Commitment,
provided  that the aggregate  principal  amount of all such Loans by all Lenders
hereunder shall equal $75,000,000.  The Commitments are not revolving in nature,
and amounts repaid or prepaid may not be reborrowed under any circumstance.

        Section 2.02 Loans.

                (a) Several  Obligations.  Each Loan shall be made on the Effec-
tive  Date  by  the  Lenders  ratably  in  accordance   with  their   respective
Commitments.  The  failure of any Lender to fund its Loan 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
fund its Loan as required.

                                       20
<PAGE>

                (b) Notes.   Each  Lender shall maintain in accordance  with its
usual  practice  an account  or  accounts  evidencing  the  indebtedness  of the
Borrower to such Lender resulting from each Loan made by such Lender,  including
the amounts of principal and interest  payable and paid to such Lender from time
to time hereunder.  The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder,  (ii) the amount of any
principal  or interest  due and  payable or to become due and  payable  from the
Borrowers to each Lender  hereunder  and (iii) the amount of any sum received by
the  Administrative  Agent  hereunder  for the  account of the  Lenders and each
Lender's share thereof.  The entries made in the accounts maintained pursuant to
this Section  2.02(b) shall be prima facie evidence of the existence and amounts
of the obligations recorded therein;  provided that the failure of any Lender or
the  Administrative  Agent to maintain  such accounts or any error therein shall
not in any manner  affect the  obligation of the Borrowers to repay the Loans in
accordance with the terms of this  Agreement.  Any Lender may request that Loans
made by it be evidenced by a Note. In such event,  the Borrowers  shall prepare,
execute  and  deliver to such  Lender one or more Notes  payable to the order of
such Lender and  substantially in the form of Exhibit A.  Thereafter,  the Loans
evidenced by such Note and interest  thereon shall at all times (including after
assignment  pursuant to Section  12.04) be  represented  by one or more Notes in
such form payable to the order of the payee named therein (or, if such Note is a
registered note, to such payee and its registered assigns).

        Section 2.03 Requests for the Loans. Not later than 12:00 noon, New York
City time,  on the  Effective  Date,  the  Borrowers  shall request the Loans by
notifying   the   Administrative   Agent  by  telephone,   fax  (or   electronic
communication,   if  arrangements  for  doing  so  have  been  approved  by  the
Administrative  Agent),  and shall  confirm  such request by  delivering  to the
Administrative   Agent  and  the   Lenders  a  written   Borrowing   Request  in
substantially  the  form  of  Exhibit  B  and  signed  by  the  Borrowers.  Such
telephonic,   electronic   or  written   request  shall  specify  the  following
information in compliance with Section 2.02:

                       (i) the aggregate amount of each requested Loan; and

                       (ii) the location and number of the applicable Borrower's
account  to  which  funds  are to be  disbursed,  which  shall  comply  with the
requirements of Section 2.04.

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.

        Section 2.04 Funding the Loans.

                (a)  Each  Lender shall make its Loan on the  Effective  Date by
wire transfer of  immediately  available  funds by 2:00 p.m., New York, New York
time, to the account of the Administrative  Agent most recently designated by it
for such purpose by notice to the Lenders.

                                       21
<PAGE>

                (b)  Funding to the  Borrower.  With  respect to  any Loans made
hereunder,  the  Administrative  Agent  will make such  Loans  available  to the
Borrowers no later than 3:00 p.m. New York City time by promptly  paying by wire
transfer  the  amounts  so  received,  in like  funds,  to one or more  accounts
designated by the Borrowers in the applicable Borrowing Request.

        Section 2.05 Termination.  The Commitments shall terminate at 3.00 p.m.,
New York,  New York time on the Effective  Date. At the close of business on the
Effective  Date,  any portion of the  Commitments  not utilized by the Borrowers
shall be permanently canceled.

        Section 2.06 [RESERVED]

        Section 2.07 Intercreditor Agreement. The Loans, the Notes, if any, this
Agreement and the other Loan  Documents;  the rights and remedies of the Lenders
and the  Administrative  Agent  hereunder and  thereunder  and the Liens created
thereby are subject to the Intercreditor Agreement.

                                  ARTICLE III
              Payments of Principal and Interest; Prepayments; Fees

        Section 3.01 Repayment of the Loans. On the Maturity Date, the Borrowers
shall repay the outstanding principal amount of the Loans in full.

        Section 3.02 Interest.

                (a)  Interest  Rate.  Except as  otherwise  provided  in Section
3.02(b),  the Loans  shall  bear  interest  at the  Adjusted  LIBO Rate for each
Interest  Period  plus the  Applicable  Margin,  but in no event to  exceed  the
Highest Lawful Rate.

                (b) Post-Default  Rate.  Notwithstanding  the foregoing,  if any
principal of or interest on any Loan or any fee or other  amount  payable by the
Borrowers or any  Guarantor  hereunder  or under any other Loan  Document is not
paid when due, whether at stated maturity,  upon acceleration or otherwise,  the
Indebtedness  shall bear interest,  after as well as before judgment,  at a rate
per annum  equal to two and  one-half  percent  (2.5%)  plus the  Interest  Rate
provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

                (c) Interest Payment Dates.  Accrued interest on each Loan shall
be payable in arrears on each Interest Payment Date;  provided that (i) interest
accrued  pursuant to Section  3.02(b) shall be payable on demand and (ii) in the
event of any prepayment of any Loan,  accrued  interest on the principal  amount
prepaid shall be payable on the date of such prepayment.

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

                                       22
<PAGE>

(including the first day but excluding the last day).  The  applicable  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 Intercreditor  Agreement. All terms of this Article III are
subject to the terms of the Intercreditor Agreement.

        Section 3.04 Prepayments.

                (a)  Optional  Prepayments.  To the extent  permitted  under the
Intercreditor  Agreement  and  subject to any  breakage  funding  costs  payable
pursuant to Section 5.02 and subject to prior notice in accordance  with Section
3.04(b), the Borrowers shall have the right to prepay the Loans, in whole on any
Business Day or in part on the last day of any Interest Period, as follows:

                        (i) at any time  during  the  period  commencing  on the
Effective Date to and including the first  anniversary of the Effective Date, no
optional prepayment shall be permitted; and

                        (ii) at any time  after  the  first  anniversary  of the
Effective Date,  optional  prepayments shall be made at the prices (expressed as
percentages of the  outstanding  principal  amount) set forth below,  if prepaid
during  each  successive  12-month  period  beginning  on  June 9 of  each  year
indicated below:

                         Year                    Prepayment Price
               -------------------               ----------------
               2007                                    102%
               2008                                    101%
               2009 and thereafter                     100%

provided that, in any event, each prepayment is in an amount that is an integral
multiple of $1,000,000 and not less than  $1,000,000,  or if such amount is less
than  $1,000,000,  the outstanding  principal  amount of the Loans.  Accrued and
unpaid interest on the principal amount prepaid, all outstanding and unpaid fees
and expenses,  and the prepayment price set forth in this Section 3.04(a), shall
be paid on the prepayment date.

                (b) Notice and Terms of Optional Prepayment.  The Borrower shall
notify the Administrative  Agent by telephone,  electronic  communication and/or
fax  (confirmed  by telecopy) of any  prepayment  hereunder not later than 12:00
noon, New York City time, seven (7) Business Days before the date of prepayment.
Each  such  notice  shall be  irrevocable  and  effective  upon  receipt  by the
Administrative  Agent and shall  specify the  prepayment  date and the principal
amount of the Loans or portion thereof to be prepaid. Promptly following receipt
of any such  notice,  the  Administrative  Agent shall advise the Lenders of the
contents  thereof.  Each prepayment shall be applied ratably to the Loans of all
Lenders  in  accordance  with  their  Percentage  Shares.

                                       23
<PAGE>

Prepayments  shall be accompanied  by accrued and unpaid  interest to the extent
required by Section 3.02.

                (c)  Mandatory  Prepayment.  The Net Cash  Proceeds of any asset
sale under Section  9.12(d),  to the extent not applied in the manner  specified
therein,  shall be used to repay the  Loans.  Such  payment  shall be due on the
121st day after the asset sale giving rise to such Net Cash Proceeds.

        Section 3.05   Fees.
                       -----

                (a) Administrative Agent Fees. The Borrowers agree to pay to the
Administrative  Agent,  for its own account,  fees payable in the amounts and at
the times  separately  agreed upon between the Borrowers and the  Administrative
Agent.

                (b) Payment of Fees. All fees payable hereunder shall be paid on
the dates due, in immediately available funds, to the Administrative Agent. Fees
paid shall not be refundable under any circumstances.

                                   ARTICLE IV
                Payments; Pro Rata Treatment; Sharing of Set-offs

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

                (a) Payments.  The Borrowers shall make each payment required to
be made by them hereunder (whether of principal, interest or fees, or of amounts
payable under Section 5.01,  Section 5.02,  Section 5.03 or otherwise)  prior to
12:00 noon, New York City time, on the date when due, in  immediately  available
funds,  without defense,  deduction,  recoupment,  set-off or counterclaim.  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, 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 as provided in Section 4.01(d).  If
any payment  hereunder  shall be due on a day that is not a Business Day, except
as otherwise set forth herein the date for payment shall be extended to the next
succeeding  Business  Day,  and, in the case of any payment  accruing  interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

                (b)  Application  of  Insufficient  Payments.  If  at  any  time
insufficient funds are received by and available to the Administrative  Agent to
pay fully all amounts of principal,  interest and fees then due hereunder,  such
funds shall,  subject to Section 4.01(d), be applied (i) first,  towards payment
of interest  and fees then due  hereunder,  ratably  among the parties  entitled
thereto in  accordance  with the amounts of  interest  and fees then due to such
parties,  and (ii)  second,  towards  payment of principal  then due

                                       24
<PAGE>

hereunder,  ratably among the parties  entitled  thereto in accordance  with the
amounts of principal then due to such parties.

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

                (d)  Notwithstanding  anything contained herein to the contrary,
all payments in respect of Indebtedness  and all proceeds of collateral shall be
applied in the manner and order set forth in the Intercreditor Agreement.

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

        Section 4.03 Certain  Deductions  by the  Administrative  Agent.  If any
Lender  shall fail to make any  payment  required  to be made by it  pursuant to
Section   4.02,   then

                                       25
<PAGE>

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 Section until all such unsatisfied obligations are fully paid.

        Section 4.04 Disposition of Proceeds.  The Security  Instruments contain
an assignment by each of the Borrowers  and/or the Guarantors  unto and in favor
of the  Administrative  Agent  for the  benefit  of the  Lenders  of all of each
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,  unless an Event of Default
has occurred and is  continuing,  (a) the  Administrative  Agent and the Lenders
agree  that they  will  neither  notify  the  purchaser  or  purchasers  of such
production  nor take any other  action to cause such  proceeds to be remitted to
the  Administrative  Agent or the Lenders,  but the Lenders will instead  permit
such  proceeds to be paid to the Borrowers  and their  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  Borrowers  and/or  such
Subsidiaries.

                                   ARTICLE V
           Increased Costs; Break Funding Payments; Taxes; Illegality

        Section 5.01  Increased Costs.
                      ---------------

                (a)  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 Loans of such Lender;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of  making or  maintaining  any Loan or to reduce  the  amount of any sum
received  or  receivable  by such  Lender  (whether  of  principal,  interest or
otherwise), then the Borrowers 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  determines  that any
Change in Law  regarding  capital  requirements  has or would have the effect of
reducing the rate of return on such  Lender's  capital or on the capital of such
Lender's holding company, if any, as a consequence of this Agreement or the Loan
made by such  Lender,  to a level  below that  which such  Lender or the or such
Lender's  holding company could have

                                       26
<PAGE>

achieved but for such Change in Law (taking  into  consideration  such  Lender's
policies  and the  policies of such  Lender's  holding  company  with respect to
capital adequacy),  then from time to time the Borrowers will pay to such Lender
such  additional  amount  or  amounts  as will  compensate  such  Lender or such
Lender's holding company for any such reduction suffered.

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

                (d)  Effect  of  Failure  or Delay in  Requesting  Compensation.
Failure or delay on the part of any Lender to demand  compensation  pursuant  to
this Section 5.01 shall not constitute a waiver of such Lender's right to demand
such  compensation;  provided  that  the  Borrowers  shall  not be  required  to
compensate a Lender  pursuant to this Section  5.01 for any  increased  costs or
reductions  incurred  more  than 180 days  prior to the date  that  such  Lender
notifies the Borrowers of the Change in Law giving rise to such increased  costs
or reductions  and of such Lender'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 Loan other than on the last day of an Interest  Period
applicable  thereto  (including  as a result  of an Event of  Default),  (b) the
failure  to  prepay  any  Loan on the date  specified  in any  notice  delivered
pursuant hereto, or (c) the assignment of any Loan other than on the last day of
the Interest Period applicable thereto as a result of a request by the Borrowers
pursuant to Section  5.04(b),  then,  in any such  event,  the  Borrowers  shall
compensate  each  Lender for the loss,  cost and  expense  attributable  to such
event.  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
Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay
such Lender the amount shown as due on any such  certificate  within 10 Business
Days after receipt thereof.

                                       27
<PAGE>

        Section 5.03   Taxes.
                       -----

                (a)  Payments  Free of  Taxes.  Any and  all  payments  by or on
account of any  obligation  of the  Borrowers  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  Borrowers  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),  the  Administrative  Agent or
any Lender  (as the case may be)  receives  an amount  equal to the sum it would
have  received  had no such  deductions  been made,  (ii) the  Borrowers or such
Guarantor  shall make such  deductions and (iii) the Borrowers or such Guarantor
shall pay the full amount  deducted to the  relevant  Governmental  Authority in
accordance with applicable law.

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

                (c)  Indemnification  by  the  Borrowers.  The  Borrowers  shall
indemnify  the  Administrative  Agent and each Lender,  within 10 Business  Days
after written demand therefor,  for the full amount of any Indemnified  Taxes or
Other Taxes paid by the  Administrative  Agent or such Lender on or with respect
to any payment by or on account of any  obligation  of the  Borrowers  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 or a Lender as to the amount of such  payment or liability
under  this  Section  5.03  shall be  delivered  to the  Borrowers  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 Borrowers or a Guarantor to a
Governmental Authority,  the Borrowers 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  either of the  Borrowers  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  such  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 such  Borrower as will permit such  payments to be made
without withholding or at a reduced rate.

                                       28
<PAGE>

        Section 5.04   Mitigation Obligations; Replacement of Lenders.
                       ----------------------------------------------

                (a)  Designation  of  Different  Lending  Office.  If any Lender
requests  compensation  under  Section 5.01, or if the Borrowers are 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 Loan 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 Borrowers
hereby agree to pay all reasonable costs and expenses  incurred by any Lender in
connection with any such designation or assignment.

                (b) Replacement of Lenders. If any Lender requests  compensation
under  Section  5.01,  or if the  Borrowers  are required to pay any  additional
amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section  5.03, or if any Lender  defaults in its  obligation to fund
its Loan  hereunder,  or if any Lender is  prevented  from making its Loan under
Section 5.05, or if any Lender declines to vote in favor of an amendment, waiver
or  other  modification  recommended  by  the  Administrative  Agent,  then  the
Borrowers may, at their sole expense and effort,  upon notice to such Lender and
the Administrative  Agent,  require such Lender to assign and delegate,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section  12.04(b)),  all  its  interests,  rights  and  obligations  under  this
Agreement to an assignee that shall assume such obligations  (which assignee may
be another Lender, if a Lender accepts such  assignment);  provided that (i) the
Borrowers  shall have received the prior written  consent of the  Administrative
Agent, which consent shall not unreasonably be withheld,  (ii) such Lender shall
have  received  payment of an amount equal to the  outstanding  principal of its
Loan, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder,  from the assignee (to the extent of such  outstanding  principal and
accrued  interest and fees) or the Borrowers (in the case of all other  amounts)
and  (iii)  in the  case of any  such  assignment  resulting  from a  claim  for
compensation  under  Section  5.01 or payments  required to be made  pursuant to
Section 5.03, such assignment will result in a reduction in such compensation or
payments.  A Lender  shall  not be  required  to make any  such  assignment  and
delegation  if,  prior  thereto,  as a result  of a  waiver  by such  Lender  or
otherwise,  the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.

        Section 5.05  Illegality.  Notwithstanding  any other  provision of this
Agreement,  in the  event  that  it  becomes  unlawful  for  any  Lender  or its
applicable  lending  office to honor its obligation to make or maintain its Loan
hereunder,  then  such  Lender  shall  promptly  notify  the  Borrowers  and the
Administrative  Agent  thereof and such Lender  promptly  shall assign such Loan
pursuant to Section 12.04 hereunder.

                                       29
<PAGE>

                                   ARTICLE VI
                              Conditions Precedent

        Section 6.01 Effective  Date. The obligations of each Lender to make its
Loans 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  and  the  Arranger  shall  have
received all fees and other amounts due and payable on or prior to the Effective
Date,  including,  to the  extent  invoiced,  reimbursement  or  payment  of all
out-of-pocket  expenses  required  to be  reimbursed  or paid  by the  Borrowers
hereunder.

                (b) The  Administrative  Agent shall have received a certificate
of the  Secretary or an Assistant  Secretary of each of the  Borrowers  and each
Guarantor  setting forth (i)  resolutions of its Board of Directors with respect
to the  authorization  of such 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 such  Borrower or such
Guarantor  (y) who are  authorized  to sign the  Loan  Documents  to which  such
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  articles  or  certificate  of  incorporation  and  bylaws  (or  other
organizational  documents)  of such  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 such Borrower or such Guarantor to the contrary.

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

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

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

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

                (g) The  Administrative  Agent shall have received an aged trial
balance of trade payables, acceptable in substance to the Administrative Agent.

                                       30
<PAGE>

                (h) 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,  the Security Agreement and the other Security Instruments  described
on Exhibit E-1.

                (i) The  Administrative  Agent shall have received an opinion of
(i) Stinson  Morrison  Hecker  LLP,  special  counsel to each of the  Borrowers,
substantially  in the form of Exhibit  D-1  hereto,  and (ii)  local  counsel in
Oklahoma  and any other  jurisdictions  requested by the  Administrative  Agent,
substantially in the form of Exhibit D-2.

                (j) The  Administrative  Agent shall have received a certificate
of insurance coverage of each of the Borrowers  evidencing that such Borrower is
carrying  insurance in accordance  with Section 7.13  including loss payable and
standard  mortgagee  provisions  or  endorsements  on the  Borrowers'  insurance
policies in accordance with Section 8.07.

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

                (l) The  Administrative  Agent shall have received the financial
statements  referred  to in  Section  7.04(a)  and the  Initial  Reserve  Report
accompanied by a certificate covering the matters described in Section 8.12(c).

                (m) The Administrative Agent shall have received appropriate UCC
search certificates  reflecting no prior Liens encumbering the Properties of the
Borrowers,  the Subsidiaries for Kansas and Oklahoma 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.

                (n) The  Administrative  Agent shall have received evidence that
Cherokee or one of its  Subsidiaries  has in place one or more  commodity  price
floors,  collars or price  swaps with one or more  Approved  Counterparties,  on
terms which are satisfactory to the Administrative Agent and Borrowers.

                (o) The  Intercreditor  Agreement  shall have been duly executed
and shall be in full force and effect.

                (p) 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 have  notified  the  Borrowers  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 its Loans
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 June 9, 2006 (and, in the

                                       31
<PAGE>

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 fund
its Loan is subject to the satisfaction of the following conditions:

                (a) At the time of and  immediately  after giving  effect to the
Loans, no Default shall have occurred and be continuing.

                (b) At the time of and  immediately  after giving  effect to the
Loans, 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 Borrowers and the
Guarantors set forth in this Agreement and in the other Loan Documents  shall be
true and  correct in all  material  respects  on and as of the  Effective  Date,
except to the extent  any such  representations  and  warranties  are  expressly
limited to an earlier date, in which case, on and as of the Effective Date, such
representations  and  warranties  shall  continue  to be true and correct in all
material respects as of such specified earlier date.

                (d) The making of such Loan,  would not conflict  with, or cause
any Lender 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,  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 the  applicable
Borrowing Request in accordance with Section 2.03.

                                  ARTICLE VII
                         Representations and Warranties

        The Borrower represents and warrants to the Lenders that:

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

        Section 7.02 Authority; Enforceability. The Transactions are within each
Borrower's and each Guarantor's  corporate or limited  liability  company powers
and have been duly  authorized by all necessary  corporate or limited  liability
company and, if

                                       32
<PAGE>

required,  stockholder  or member action  (including,  without  limitation,  any
action  required  to be taken by any  class of  directors  or  managers  of such
Borrower,  whether  interested  or  disinterested,  in order to  ensure  the due
authorization  of the  Transactions).  Each Loan Document to which each Borrower
and each  Guarantor  is a party has been duly  executed  and  delivered  by such
Borrower  and  such  Guarantor  and  constitutes  a  legal,  valid  and  binding
obligation of such 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.  Except as set forth on Schedule
7.03,  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,  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,  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
the  charter,  by-laws  or  other  organizational  documents  of  either  of the
Borrowers or any  Subsidiary  or, except as could not  reasonably be expected to
have a Material  Adverse Effect,  any order of any Governmental  Authority,  (c)
will not violate or result in a default under any indenture,  agreement or other
instrument binding upon either Borrower or any Subsidiary or its Properties,  or
give  rise to a right  thereunder  to  require  any  payment  to be made by such
Borrower or such  Subsidiary,  except any  violation  or default  that could not
reasonably be expected to have a Material Adverse Effect and (d) will not result
in the creation or imposition of any Lien on any Property of either  Borrower or
any Subsidiary (other than the Liens created by the Loan Documents).

        Section  7.04  Financial Condition; No Material Adverse Change.
                       ----------------------------------------------

                (a)  Each  of the  Borrowers  has  heretofore  furnished  to the
Lenders  (i)  its   consolidated   balance  sheet  and   statements  of  income,
stockholders equity and cash flows (x) as of and for the year ended December 31,
2005, reported on by Murrell,  Hall, McIntosh & Co. PLLP, independent registered
public accounting firm, and (y) as of and for the fiscal quarter and the portion
of the fiscal year ended March 31, 2006,  reviewed by Murrell,  Hall, McIntosh &
Co PLLP. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of such 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,  2005,  (i)  there  has been no event,
development or circumstance that has had or could reasonably be expected to have
a

                                       33
<PAGE>

Material  Adverse  Effect  and (ii) the  business  of the  Borrowers  and  their
respective   Subsidiaries  has  been  conducted  only  in  the  ordinary  course
consistent with past business  practices,  in each case,  except as disclosed in
the filings made with the SEC as of March 31, 2006 by the Company.

                (c)  Neither  of  the  Borrowers  nor  any of  their  respective
Subsidiaries  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  (other than
the Gas Balancing  Obligations and the Swap Agreements  listed on Schedule 7.21)
which  are  not  referred  to or  reflected  or  provided  for in the  Financial
Statements.

        Section 7.05 Litigation. 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 either of the
Borrowers,  threatened  against or affecting such Borrower or any Subsidiary (i)
not fully covered by insurance (except for normal deductibles) 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.

        Section 7.06  Environmental  Matters.  Except as could not be reasonably
expected to have a Material  Adverse Effect (or with respect to (c), (d) and (e)
below,  where the failure to take such actions could not be reasonably  expected
to have a Material Adverse Effect):

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

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

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

                                       34
<PAGE>

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

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

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

                (g) neither  Borrower and no Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened  release
of any oil,  hazardous  substance,  solid  waste or oil and gas  waste  into the
environment.

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

                (a) Each of the Borrowers  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 governmental
authorizations  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 of the Borrowers and no Subsidiary 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 either Borrower or any 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 a
Borrower or any Subsidiary or any of their Properties is bound.

                                       35
<PAGE>

                (c) No Default has occurred and is continuing.

        Section 7.08   Investment  Company Act.  Neither of the Borrowers and no
Subsidiary  is an  "investment  company"  within the  meaning  of, or subject to
regulation under, the Investment Company Act of 1940, as amended.

        Section 7.09   [Intentionally Omitted]

        Section 7.10  Taxes.  Each of the Borrowers and their respective Subsid-
iaries  has  timely  filed or  caused to be filed all Tax  returns  and  reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate  proceedings and for which such 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 each of the Borrowers and its respective Subsidiaries in respect of
Taxes and other  governmental  charges  are, in the  reasonable  opinion of such
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 7.11   ERISA.

                (a) The Borrowers,  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,  maintained  in  substantial
compliance with ERISA and, where applicable, the Code.

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

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

                (e) Full payment when due has been made of all amounts which the
Borrowers,  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,

                                       36
<PAGE>

and no  accumulated  funding  deficiency (as defined in section 302 of ERISA and
section  412 of the Code),  whether or not waived,  exists  with  respect to any
Plan.

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

                (g)  Neither  of  the   Borrowers,   any  of  their   respective
Subsidiaries or 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 either  Borrower,  a
Subsidiary or any ERISA Affiliate in its sole discretion at any time without any
material liability.

                (h)  Neither  of  the   Borrowers,   any  of  their   respective
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 Multiemployer Plan.

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

        Section 7.12 Disclosure;  No Material Misstatements.  The Borrowers have
disclosed  to  the   Administrative   Agent  and  the  Lenders  all  agreements,
instruments  and corporate or other  restrictions  to which they or any of their
respective  Subsidiaries  is subject as of the date of this  Agreement,  and all
other matters known to either of them,  as of the date of this  Agreement  that,
individually  or in the aggregate,  could  reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or  other  information  furnished  by or on  behalf  of  the  Borrowers  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),  when taken together with all
other  such  furnished   documents  and   information,   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 Borrowers represent 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 Borrowers 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  Borrowers  or any  Subsidiary

                                       37
<PAGE>

prior  to,  or  on,  the  date  hereof  in  connection  with  the   transactions
contemplated  hereby.  No statements or conclusions  exist in any Reserve Report
which are based upon or  include  misleading  information  or which fail to take
into account material information  regarding the matters reported therein to the
extent such misstatement,  misleading information or failure could reasonably be
expected to have a Material Adverse Effect.

        Section 7.13  Insurance.  The Borrowers  have, and have caused all their
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 Borrowers and their  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 7.14  Restriction on Liens.  Other than as set forth in Schedule
7.14,  neither of the Borrowers or any of their  Subsidiaries  is a party to any
material  agreement or arrangement  (other than Liens for secured debt permitted
by Section  9.03),  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 7.15  Subsidiaries.  Except as set forth on Schedule  7.15 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  7.15,  the
Borrowers have no Subsidiaries.

        Section  7.16  Location of Business  and Offices.  The  jurisdiction  of
organization of Quest Resource  Corporation is Nevada; its name as listed in the
public  records  of  its   jurisdiction   of   organization  is  Quest  Resource
Corporation; and its organizational identification number in its jurisdiction of
organization is C4082-1982,  the jurisdiction of organization of Quest Cherokee,
LLC is Delaware; its name as listed in the public records of its jurisdiction of
organization  is Quest  Cherokee,  LLC;  and its  organizational  identification
number is 3739332 (or, in each case,  as set forth in a notice  delivered to the
Administrative  Agent  pursuant to Section  8.01(m) in  accordance  with Section
12.01).  The Borrowers'  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(n)  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(n)).

        Section 7.17   Properties; Titles, Etc.
                       -----------------------

                                       38
<PAGE>

                (a)  Each of the  Borrowers  and the  Subsidiaries  has good and
defensible  title to, or valid and enforceable  leasehold  interests in, the Oil
and Gas Properties  evaluated in the most recently  delivered Reserve Report and
good title to all its personal  Properties,  in each case, free and clear of all
Liens except Liens  permitted by Section  9.03.  After giving full effect to the
Excepted Liens, the Borrower or the Subsidiary  specified as the owner or lessee
owns the net interests in production  attributable to the Hydrocarbon  Interests
as reflected in the most recently delivered Reserve Report, and the ownership or
lease  of such  Properties  shall  not in any  material  respect  obligate  such
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 such 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 Borrowers and the  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 Borrowers and the Subsidiaries  including,  without  limitation,
all easements and rights of way, include all rights and Properties  necessary to
permit the  Borrowers  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 Borrowers and the  Subsidiaries
which are reasonably necessary for the operation of their businesses are in good
working  condition  (ordinary  wear and tear  excepted)  and are  maintained  in
accordance with prudent business standards.

                (e)  Each of the  Borrowers  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 such
Borrower  and such  Subsidiary  does 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 Borrowers and their  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.

        Section 7.18 Maintenance of Properties. Except for such acts or failures
to act as could not be reasonably  expected to have a Material  Adverse  Effect,
the Oil and Gas Properties (and Properties  unitized therewith) of the Borrowers
and their  Subsidiaries

                                       39
<PAGE>

have been  maintained,  operated and developed in a good and workmanlike  manner
and in conformity  with all Government  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 Borrowers and their 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
either of the  Borrowers  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 either of the
Borrowers or any  Subsidiary is deviated from the vertical more than the maximum
permitted  by  Government  Requirements,  and such wells are, in fact,  bottomed
under and are producing from, and the well bores are wholly within,  the Oil and
Gas  Properties  (or in  the  case  of  wells  located  on  Properties  unitized
therewith,  such unitized  Properties) of such 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 either of
the  Borrowers  or any of its  Subsidiaries  that are  reasonably  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 either of the Borrowers or any of its  Subsidiaries,  in a manner  consistent
with such Borrower's or such  Subsidiaries' past practices (other than those the
failure of which to  maintain in  accordance  with this  Section  7.18 could not
reasonably be expected to have a Material Adverse Effect).

        Section  7.19  Gas  Imbalances,  Prepayments.  Except  as set  forth  on
Schedule 7.19 or on the most recent  certificate  delivered  pursuant to Section
8.12(b),  on a net  basis  there  are no gas  imbalances,  take or pay or  other
prepayments  which  would  require  either  of  the  Borrowers  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 1.0 bcf of gas (on an mcf equivalent basis) in the aggregate.

        Section 7.20 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.20, and thereafter  either  disclosed in
writing to the  Administrative  Agent or included in the most recently delivered
Reserve Report (with respect to all of which  contracts the Borrowers  represent
that they or their  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 Borrowers' or their  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.

        Section 7.21 Swap Agreements.  Schedule 7.21, as of the date hereof, and
after the date  hereof,  each report  required to be  delivered by either of the
Borrowers  pursuant

                                       40
<PAGE>

to Section 8.01(e),  sets forth, a true and complete list of all Swap Agreements
of the Borrowers and each of their Subsidiaries, the type, term, effective date,
termination date and notional  amounts or volumes,  the net mark to market value
thereof as of the most  recent date  available,  all credit  support  agreements
relating   thereto   (including  any  margin   required  or  supplied)  and  the
counterparty to each such agreement.

        Section 7.22 Use of Proceeds. The proceeds of the Loans shall be used to
provide  working capital for  exploration  and production  operations,  pipeline
construction,  oil and gas lease  acquisition,  permitted  acquisitions  and for
general business purposes.  The Borrowers and their Subsidiaries are not engaged
principally, or as one of its 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 will be used for any purpose which  violates
the provisions of Regulations T, U or X of the Board.

        Section  7.23  Solvency.   After  giving  effect  to  the   transactions
contemplated  hereby,  (a) the aggregate  assets (after giving effect to amounts
that could reasonably be received by reason of indemnity,  offset,  insurance or
any  similar  arrangement),  at a fair  valuation,  of  the  Borrowers  and  the
Guarantors,  taken as a whole,  will exceed the aggregate  Debt of the Borrowers
and the Guarantors on a  consolidated  basis,  as the Debt becomes  absolute and
matures,  (b) each of the Borrowers and the Guarantors will not have incurred or
intended  to incur,  and will 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 Borrowers 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  Borrowers 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 7.24   Operating Expenses.  As of the date of this Agreement:
                       -----------------------------------------------------

                (a) Borrowers  have no unpaid bills with an invoice date earlier
than August 1, 2005 for  improvements to their Oil and Gas Properties that could
give  rise to  mechanics',  materialmen's  or other  similar  liens  arising  by
operation of applicable law.

                (b)  With  respect  to  the  Operating  Agreements  relating  to
Borrowers' Working Interest and Net Revenue Interest in the Properties:

                        (i) there are no  outstanding  calls for payments  under
any Authority for  Expenditure or payments which are due or which  Borrowers or,
to the  best  of  Borrowers'  knowledge,  any  predecessor  or  predecessors  of
Borrowers  have  committed  to make  which  have not been or are not being  paid
within the terms required; and

                        (ii) there are no operations  under any of the Operating
Agreements  with respect to which Borrowers have become a  non-consenting  party
nor

                                       41
<PAGE>

are there any non-consenting  penalties binding or that will become binding upon
Borrowers that are not reflected in the Net Revenue Interest or Working Interest
as set forth on Exhibit A to the Mortgage.

                                  ARTICLE VIII
                              Affirmative Covenants

        Until the  principal  of and  interest on each Loan and all fees payable
hereunder and all other amounts  payable  under the Loan  Documents  (other than
contingent  indemnity  obligations)  shall have been paid in full, the Borrowers
covenant and agree with the Lenders that:

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

                (a) Annual Financial  Statements.  As soon as available,  but in
any event  not  later  than 90 days  after  the end of each  fiscal  year of the
Company,  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 Murrell,  Hall,  McIntosh & Co. PLLP or
another independent registered public accounting firm (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 Company 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 not later than 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company,  its consolidated balance sheet and
related statements of operations,  stockholders' equity and cash flows as of the
end of and for such fiscal  quarter and the then  elapsed  portion of the fiscal
year,  setting  forth  in each  case in  comparative  form the  figures  for the
corresponding  period or periods of (or, in the case of the balance sheet, as of
the end of) the previous  fiscal  year,  all  certified by one of its  Financial
Officers as presenting fairly in all material  respects the financial  condition
and results of operations of the Company 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.

                (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 8.13(b) and Section
9.01 and (iii) stating whether any change in GAAP or in the application  thereof
has  occurred  since the date of the most recent  audited  financial  statements
delivered

                                       42
<PAGE>

pursuant to Section 8.01(a) and, if any such change has occurred, specifying the
effect of such change on the financial statements accompanying such certificate.

                (d)   Certificate   of   Financial   Officer  --   Consolidating
Information.  If, at any time,  all of the  Subsidiaries  of the Company are not
Consolidated  Subsidiaries,  then  concurrently  with any  delivery of financial
statements  under  Section  8.01(a)  or  Section  8.01(b),  a  certificate  of a
Financial  Officer  setting  forth  consolidating  spreadsheets  that  show  all
unconsolidated  Subsidiaries and the eliminating  entries, in such form as would
be presentable to the auditors of the Company.

                (e)  Certificate  of  Financial   Officer  -  Swap   Agreements.
Concurrently with any delivery of financial statements under Section 8.01(a) and
Section  8.01(b),  a certificate of a Financial  Officer,  in 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 each of the Borrowers and each Subsidiary, listing the type, term,
effective  date,  termination  date and  notional  amounts or  volumes,  the net
mark-to-market  value therefor to the extent  available,  any new credit support
agreements  relating thereto not listed on Schedule 7.21, any margin required or
supplied under any credit support  document,  and the  counterparty to each such
agreement.

                (f) Certificate of Insurer -- Insurance  Coverage.  Concurrently
with any delivery of financial  statements under Section 8.01(a),  a certificate
of insurance  coverage from each insurer with respect to the insurance  required
by Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if  requested  by the  Administrative  Agent or any  Lender,  copies of all
applicable policies.

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

                (h) SEC and Other  Filings;  Reports to  Shareholders.  Promptly
after the same become publicly  available,  and upon the request of the Lenders,
copies of all periodic and other reports,  proxy  statements and other materials
filed by either of the  Borrowers  or any  Subsidiary  with the SEC, or with any
national  securities  exchange and distributed by either of the Borrowers to its
shareholders.

                (i)  Notices  Under  Material  Instruments.  Promptly  after the
furnishing thereof,  copies of any financial statement or report furnished to or
by any  Person or  notices  furnished  by the  Borrowers  to any  other  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.

                                       43
<PAGE>

                (j) Lists of Purchasers.  Concurrently  with the delivery of any
Reserve Report to the  Administrative  Agent pursuant to Section 8.12, a list of
Persons who  purchase  (or did  purchase in the last six months) at least 80% of
the Hydrocarbons from the Borrowers and the Subsidiaries, taken as a whole.

                (k) Notice of Sales of Oil and Gas Properties. In the event that
either of the Borrowers or any Subsidiary intends to sell,  transfer,  assign or
otherwise dispose of at least $500,000 worth 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.

                (l) Notice of Casualty Events. Prompt written notice, and in any
event within three Business Days, of the occurrence of any Casualty Event or the
commencement  of any action or proceeding  that could  reasonably be expected to
result in a Casualty Event.

                (m) Certificate of Responsible Officer--Total Debt. At the times
specified in Section 8.12(d) and promptly following any change to PV-10 pursuant
to Section  8.12(a) or Section 9.12,  the Borrowers  will  promptly,  but in any
event within fifteen (15) days after any such event,  deliver a certificate of a
Responsible  Officer of the Borrowers  setting forth the PV-10 both prior to and
after giving effect to such event.

                (n)  Information  Regarding  Borrowers  and  Guarantors.  Prompt
written  notice (and in any event within thirty (30) days prior  thereto) of any
change (i) in the Borrowers' 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  Borrowers  or any
Guarantor's  chief  executive  office or  principal  place of business if either
Borrower or any  Guarantor  is not a registered  organization  under the Uniform
Commercial  Code,  (iii)  in the  Borrowers'  or  any  Guarantor's  identity  or
corporate structure,  (iv) in the Borrowers' or any Guarantor's  jurisdiction of
organization  or such  Person's  organizational  identification  number  in such
jurisdiction  of  organization,  and (v) in the  Borrowers'  or any  Guarantor's
federal taxpayer identification number.

                (o) Production Report and Lease Operating  Statements.  With the
delivery of quarterly  financial  statements  under  Section  8.01(b),  a report
setting  forth,  for each calendar  month during the then current fiscal year to
date on a production date basis, the volume of production and sales attributable
to  production  (and the prices at which  such sales were made and the  revenues
derived  from such  sales)  for each such  calendar  month  from the Oil and Gas
Properties,  and setting forth the related ad valorem,  severance and production
taxes and lease operating  expenses  attributable  thereto and incurred for each
such calendar month.

                (p)  Notices  of  Certain  Changes.  Promptly,  but in any event
within  five (5)  Business  Days  after  the  execution  thereof,  copies of any
amendment,  modification  or  supplement  to  the  certificate  or  articles  of
incorporation,  by-laws,  any preferred  stock  designation or any other organic
document of either of the Borrowers or any Subsidiary  that would  reasonably be
expected  to have a  Material  Adverse  Effect on

                                       44
<PAGE>

the  ability  of  either of the  Borrowers  or any  Subsidiary  to  perform  its
obligations hereunder or under any Loan Documents.

                (q) Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations,  business affairs and
financial  condition of the  Borrowers  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,  as the Administrative Agent or any Lender
may reasonably request.

                (r)  Delivery  of  Information  Electronically.  Notices  to the
Administrative Agent and the Lenders under this Section 8.01 may be delivered or
furnished by electronic  communications  pursuant to procedures  approved by the
Administrative Agent.

        Section 8.02 Notices of Material  Events.  The Borrowers 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  either  of  the
Borrowers 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  previously  disclosed  to the Lenders  that,  if
adversely  determined,  could  reasonably  be expected to result in liability in
excess  of  $1,000,000  not  fully  covered  by  insurance,  subject  to  normal
deductibles;

                (c) the  occurrence  of any ERISA Event that,  alone or together
with any other ERISA Events that have occurred,  could reasonably be expected to
result in  liability  of  either of the  Borrowers  and its  Subsidiaries  in an
aggregate amount exceeding $1,000,000; and

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

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

        Section 8.03 Existence; Conduct of Business. Each of the Borrowers 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 other  jurisdiction  in which its Oil and Gas Properties are 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

                                       45
<PAGE>

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.  Each of the Borrowers  will,  and
will cause each Subsidiary to, pay its obligations, including Tax liabilities of
the  Borrowers  and all of  their  Subsidiaries  before  the same  shall  become
delinquent or in default (provided,  that Borrowers and their Subsidiaries shall
have up to 60 days after due date to pay trade payables  arising in the ordinary
course of  business),  except where (a) the validity or amount  thereof is being
contested in good faith by  appropriate  proceedings,  (b) such 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 either of the  Borrowers or any
Subsidiary.

        Section  8.05  Performance  of  Obligations  under Loan  Documents.  The
Borrowers will pay the Loans  according to the terms thereof,  and the Borrowers
will, and will cause each  Subsidiary to, do and perform every act and discharge
all of the  obligations  to be performed  and  discharged by them under the Loan
Documents,  including,  without limitation, this Agreement, at the time or times
and in the manner specified.

        Section  8.06  Operation  and  Maintenance  of  Properties.  Each of the
Borrowers, 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 pro ration  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 and maintain  all  Property  material to the conduct of
its  business  in good  working  order  and  condition,  ordinary  wear and tear
excepted,  preserve,  maintain  and  keep  in good  repair,  working  order  and
efficiency  (ordinary  wear and tear excepted) all of its Oil and Gas Properties
and other Properties,  including,  without limitation, all equipment,  machinery
and  facilities  except,  in each  case,  where the  failure  to do so could not
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 except,

                                       46
<PAGE>

in each case,  where the  failure to do so could not  reasonably  be expected to
have a Material Adverse Effect.

                (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, in each case, where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.

                (e) to the extent one of the  Borrowers  is not the  operator of
any Property,  the Borrowers shall use reasonable  efforts to cause the operator
to comply with this Section 8.06.

        Section  8.07  Insurance.  The  Borrowers  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,  shall  include a standard  mortgagee  provision 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.

        Section 8.08 Books and Records;  Inspection  Rights. The Borrowers 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 Borrowers 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,  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 8.09  Compliance  with Laws. The Borrowers  will, and will cause
each Subsidiary to, comply with all laws,  rules,  regulations and orders of any
Governmental  Authority  applicable  to it or its  Property,  except  where  the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect.

        Section 8.10   Environmental Matters.
                       ---------------------

                (a) The Borrowers shall at their sole expense:  (i) comply,  and
shall  cause  their  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 dispose

                                       47
<PAGE>

of or otherwise  release,  and shall cause each  Subsidiary not to dispose of or
otherwise release,  any oil, oil and gas waste,  hazardous  substance,  or solid
waste on,  under,  about or from any of the  Borrowers'  or their  Subsidiaries'
Properties or any other  Property to the extent caused by the  Borrowers' or any
of  their   Subsidiaries'   operations  except  in  compliance  with  applicable
Environmental  Laws,  the  disposal  or 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 notices,  permits,
licenses, exemptions, approvals,  registrations or other authorizations, if any,
required  under  applicable  Environmental  Laws  to be  obtained  or  filed  in
connection  with the operation or use of the  Borrower's or their  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  disposal  or other  release  of any oil,  oil and gas  waste,  hazardous
substance or solid waste on, under, about or from any of the Borrowers' or their
Subsidiaries' Properties,  which failure to commence and diligently prosecute to
completion could  reasonably be expected to have a Material Adverse Effect;  and
(v) 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  Borrowers'  and their  Subsidiaries'  obligations  under  this
Section 8.10(a) are timely and fully  satisfied,  which failure to establish and
implement could reasonably be expected to have a Material Adverse Effect.

                (b) The Borrowers 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 landowner
or other third party against  either of the Borrowers or their  Subsidiaries  or
their  Properties  of which the Borrower has  Knowledge in  connection  with any
Environmental  Laws  (excluding  routine  testing and corrective  action) if the
Borrower  reasonably  anticipates  that such  action  will  result in  liability
(whether  individually  or in the aggregate) in excess of $1,000,000,  not fully
covered by insurance, subject to normal deductibles.

                (c) The  Borrowers  will,  and will  cause each  Subsidiary  to,
provide  environmental  audits and tests in accordance with American  Society of
Testing  Materials  standards (i) upon the occurrence and during the continuance
of an Event of Default  if  requested  by the  Administrative  Agent,  (ii) upon
request by the  Administrative  Agent and the Lenders if required to be obtained
by the  Administrative  Agent or the Lenders by any Governmental  Authority,  or
(iii) in connection  with any future  acquisitions  of Oil and Gas Properties or
other real estate  Properties  with a fair market value in excess of $2,000,000,
unless waived by the Administrative Agent.

                                       48
<PAGE>

        Section 8.11   Further Assurances.
                       ------------------

                (a) The  Borrowers at their  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  Borrowers  or  any
Subsidiary,  as the case may be, in the Loan Documents,  including the Notes, if
requested,  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 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) Each of the Borrowers 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 either of the Borrowers or any 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 8.12   Reserve Reports.
                       ---------------

                (a) On or  before  March  1st and  September  1st of each  year,
commencing  September 1, 2006, the Borrowers shall furnish to the Administrative
Agent and the Lenders a Reserve Report.  The Reserve Report as of December 31 of
each year (and delivered on or before March 1 of the immediately following year)
shall be prepared by one or more Approved Petroleum  Engineers,  and the June 30
Reserve  Report  (delivered  on or before  September  1) of each  year  shall be
prepared  either  by or under  the  supervision  of the  chief  engineer  of the
Borrowers 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  December  31  Reserve  Report  or by one or more  Approved  Petroleum
Engineers.

                (b)  In the  event  of a  determination  of  the  PV-10  as of a
specified  date other than January 1 and July 1, the Borrowers  shall furnish to
the Administrative  Agent and the Lenders a Reserve Report prepared either by or
under the  supervision  of the chief engineer of the Borrowers 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  December 31
Reserve Report or by one or more Approved Petroleum Engineers.

                (c) With the  delivery of each  Reserve  Report,  the  Borrowers
shall provide to the Administrative  Agent and the Lenders 1) a certificate from
a  Responsible  Officer  certifying  that  in all  material  respects:  (i)  the
information  contained in the

                                       49
<PAGE>

Reserve Report and any other  information  delivered in connection  therewith is
true and correct,  and no statements or conclusions exist in such Reserve Report
which are based upon or  include  misleading  information  or which fail to take
into account material information  regarding the matters reported therein to the
extent such misstatement,  misleading information or failure could reasonably be
expected  to  have  a  Material  Adverse  Effect,  (ii)  the  Borrowers  or  the
Subsidiaries  own  good and  defensible  title  to,  or  valid  and  enforceable
leasehold  interests  in, the Oil and Gas  Properties  evaluated in such Reserve
Report and such  Properties are free of all Liens except for Liens  permitted by
Section 9.03, (iii) except as set forth on an exhibit to the  certificate,  on a
net  basis  there are no gas  imbalances,  take or pay or other  prepayments  in
excess of the volume  specified  in Section 7.19 with respect to its Oil and Gas
Properties  evaluated in such Reserve  Report which would require  either of the
Borrowers 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 PV-10 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,  and (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 Borrowers could reasonably
be expected to have been  obligated to list on Schedule 7.20 had such  agreement
been in effect on the date hereof and 2)  electronically,  a schedule of the Oil
and  Gas  Properties  evaluated  by  such  Reserve  Report  that  are  Mortgaged
Properties  and  certifying  that  each Oil and Gas  Property  that  constitutes
collateral  for the  Senior  Credit  Agreement  and the  Second  Lien  Term Loan
Agreement also  constitutes  collateral for the Indebtedness  outstanding  under
this Agreement and demonstrating  that the percentage of value of such Mortgaged
Properties complies with Section 8.14.

        Section 8.13   Title Information.
                       -----------------

                (a) On or before the  delivery to the  Administrative  Agent and
the Lenders of each Reserve Report  required by Section  8.12(a),  the Borrowers
will  deliver  title  information  in  form  and  substance  acceptable  to  the
Administrative  Agent covering  enough of the Oil and Gas Properties  (excluding
the  Pipeline)  evaluated by such  Reserve  Report that were not included in the
immediately  preceding Reserve Report, so that the Administrative Agent shall be
reasonably  satisfied with the status of title to or leasehold  interests in the
Oil and Gas Properties  evaluated by such Reserve Report  representing  not less
than 80% of the total value of such Properties,  provided the Borrowers will not
be required to deliver any title opinions on Oil and Gas Properties that are not
Proved Mineral Interests.

                (b)  If  the  Borrowers  have  provided  title  information  for
additional Properties under Section 8.13(a), the Borrowers shall, within 90 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

                                       50
<PAGE>

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 be reasonably  satisfied with the
status of title to the Oil and Gas Properties evaluated by such Reserve Report.

                (c) If the  Borrowers  are  unable  to  cure  any  title  defect
requested  by the  Administrative  Agent or the  Lenders to be cured  within the
90-day  period or the Borrowers do not comply with the  requirements  to provide
acceptable title information on 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 90-day period has elapsed,  the
Administrative Agent may send a notice to the Borrowers and the Lenders that the
then  outstanding  PV-10  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 to the Oil and Gas Properties.  This new
PV-10 shall become effective immediately after receipt of such notice.

        Section 8.14   Additional Collateral.
                       ---------------------

        In  connection  with each  redetermination  of the PV-10,  the Borrowers
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section  8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent  at  least  80% of the  total  value  of the Oil  and  Gas  Properties
(excluding the Pipeline) 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 value,  then each of the  Borrowers  shall,
and shall  cause  their  Subsidiaries  to,  grant,  within  thirty  (30) days of
delivery  of  the   certificate   required   under  Section   8.12(c),   to  the
Administrative  Agent as security for the  Indebtedness  a  first-priority  Lien
interest (subject only to Excepted Liens of the type described in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisos at the end of
such  definition) on additional Oil and Gas Properties  (excluding the Pipeline)
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 value.  All such Liens will be created and  perfected by and in accordance
with the  provisions  of  mortgages,  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.  The  Borrowers  agree  that they will not,  and will not  permit  any
Subsidiary  to,  grant  a Lien on any  Property  to  secure  the  Senior  Credit
Agreement  or the Second Lien Term Loan  Agreement  without  (i) giving  written
notice to the Administrative Agent and (ii) granting to the Administrative Agent
to secure the Indebtedness a third-priority Lien on this same Property.

                                       51
<PAGE>

        Section  8.15 ERISA  Compliance.  Each of the  Borrowers  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, the Internal Revenue Service or the PBGC,
copies of each annual and other  report  with  respect to each Plan or any trust
created  thereunder,  (ii) promptly upon becoming aware of the occurrence of any
ERISA Event or of any "prohibited  transaction,"  as described in section 406 of
ERISA or in section 4975 of the Code, in  connection  with any Plan or any trust
created  thereunder,  a written  notice signed by the President or the principal
Financial Officer of the applicable Borrower,  Subsidiary or ERISA Affiliate, as
the case may be,  specifying  the nature  thereof,  what action  such  Borrower,
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,  the  Department of Labor or the PBGC with respect  thereto,  and (iii)
promptly upon receipt  thereof,  copies of any notice of the PBGC's intention to
terminate or to have a trustee appointed to administer any Plan. With respect to
each Plan (other than a  Multiemployer  Plan),  each of the Borrowers  will, and
will cause each  Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a
timely  manner,  without  incurring any late payment or  underpayment  charge or
penalty and without giving rise to any Lien, all of the contribution and funding
requirements  of  section  412  of  the  Code  (determined   without  regard  to
subsections  (d),  (e),  (f)  and  (k)  thereof)  and of  section  302 of  ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner,  without incurring any late
payment or underpayment  charge or penalty,  all premiums  required  pursuant to
sections 4006 and 4007 of ERISA.

        Section 8.16 Swap Agreements.  The Borrowers shall or shall cause one or
more of their  Subsidiaries to maintain the hedged  position  established by the
Swap  Agreements  required  under Section  6.01(n)  during the period  specified
therein and shall neither  assign,  terminate or unwind any such Swap Agreements
nor sell any Swap  Agreements if the effect of such action (when taken  together
with any other Swap  Agreements  executed  contemporaneously  with the taking of
such action) would have the effect of canceling  its  positions  under such Swap
Agreements required hereby.

        Section 8.17 Marketing Activities.  The Borrowers will not, and will not
permit any of their  Subsidiaries  to,  engage in marketing  activities  for any
Hydrocarbons  or  enter  into  any  contracts  related  thereto  other  than (i)
contracts for the sale of Hydrocarbons  scheduled or reasonably  estimated to be
produced  from  their  proved Oil and Gas  Properties  during the period of such
contract,  (ii) contracts for the sale of  Hydrocarbons  scheduled or reasonably
estimated to be produced  from proved Oil and Gas  Properties  of third  parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrowers and their  Subsidiaries that either of the Borrowers 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 (iii) other  contracts  for the purchase  and/or
sale of  Hydrocarbons  of third  parties  (A) which  have  generally  offsetting
provisions (i.e. corresponding pricing mechanics,  delivery dates and points and
volumes) such that no "position" is taken and

                                       52
<PAGE>

(B) for  which  appropriate  credit  support  has been  taken to  alleviate  the
material credit risks of the counterparty thereto.

                                   ARTICLE IX
                               Negative Covenants

        Until the  principal  of and  interest on each Loan and all fees payable
hereunder and all other amounts  payable  under the Loan  Documents  (other than
contingent  indemnification  obligations)  have been paid in full, the Borrowers
covenant and agree with the Lenders that:

        Section 9.01   Financial Covenants.
                       -------------------

                (a)  The  Borrowers  will  have  net  sales  of  natural  gas on
commercial  terms  customary in the local market of not less than 2,380 mmcf for
the quarter ending June 30, 2006;  3,080 mmcf for the quarter  ending  September
30, 2006; and 3,430 mmcf for the quarter ending December 31, 2006.

                (b) For  purposes of this  Section  9.01(b),  "EBITDA"  shall be
calculated  using EBITDA for such quarter  multiplied by four (4). The Borrowers
shall  maintain a ratio of Total  Debt to EBITDA of not more than the  following
ratios for the quarters ending on the dates indicated below:

           Ratio               Period

           4.5 to 1.0          for the quarter ending March 31, 2007,

           4.25 to 1.0         for the quarter ending June 30, 2007,

           4.00 to 1.0         for the quarter ending September 30, 2007,

           3.75 to 1.0         for the quarter ending December 31, 2007,

           3.50 to 1.0         for the quarter ending March 31, 2008,

           3.25 to 1.0         for the quarter ending June 30, 2008, and

           3.0 to 1.0          for each quarter ending on or after September 30,
                               2008

                (c) The  Borrowers  shall not permit the ratio of (i) PV-10,  as
set forth on the most recent Reserve Report  delivered  pursuant to Section 8.12
to (ii) Total Debt to be less than 1.5 to 1.0.

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

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

                                       53
<PAGE>

                (b) Debt of the Borrowers and their Subsidiaries existing on the
date hereof that is reflected in the Financial Statements.

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

                (d)  Debt  (including   guarantees)  under  Capital  Leases  and
purchase money obligations not to exceed $2,500,000 in the aggregate.

                (e) Debt (including  guarantees) associated with bonds or surety
obligations  required  by  Governmental  Requirements  or any  other  Person  in
connection with the operation of the Oil and Gas Properties.

                (f) intercompany  Debt between the Borrowers,  between either of
the Borrowers and any Subsidiary or between Subsidiaries to the extent permitted
by Section 9.05(g); provided that such Debt is not held, assigned,  transferred,
negotiated or pledged to any Person other than either of the Borrowers or one of
their  Wholly-Owned  Subsidiaries or the  Administrative  Agent on behalf of the
"Lenders"  and  "Swap   Counterparties"  (as  such  terms  are  defined  in  the
Intercreditor  Agreement),  and,  provided  further,  that any such Debt owed by
either a Borrower or a Guarantor shall be  subordinated  to the  Indebtedness on
terms set forth in the Security Agreement or the Intercreditor Agreement.

                (g) endorsements of negotiable instruments for collection in the
ordinary course of business.

                (h) Debt under the Senior Credit  Agreement that does not exceed
$100,000,000 in the aggregate and Debt under the Second Lien Term Loan Agreement
and any guarantees  thereof,  the principal amount of which Debt does not exceed
$100,000,000 in the aggregate.

                (i) Debt in  connection  with Swap  Agreements  and permitted in
accordance with Section 9.18.

                (j)  reimbursement  obligations  under  (i)  letters  of  credit
outstanding  on the date of this  Agreement  and (ii)  other  letters  of credit
provided the aggregate  undrawn face amount of such other letters of credit does
not exceed $20,000,000.

                (k) guarantees of Debt otherwise permitted under Section 9.02.

                (l) Permitted Refinancing Debt.

                (m) other Debt,  not otherwise  permitted  above,  not to exceed
$2,000,000 in the aggregate at any one time outstanding.

                                       54
<PAGE>

        Section 9.03 Liens.  Neither of the Borrowers  will, 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 and purchase money obligations
permitted by Section 9.02(d) but only on the Property under lease or purchased.

                (d)  Liens  to  secure  obligations  under  any  Swap  Agreement
permitted by Section 9.18.

                (e) Liens in existence on the date of this  Agreement  and shown
on Schedule 7.14.

                (f) Liens securing reimbursement  obligations in connection with
letters of credit outstanding on the date of this Agreement and other letters of
credit  provided  the  aggregate  undrawn  face amount of such other  letters of
credit does not exceed $20,000,000.

                (g) Liens securing Permitted Refinancing Debt.

                (h) Liens on Property  securing the Senior  Credit  Agreement or
the Second  Lien Term Loan  Agreement  permitted  by Section  9.02(h)  provided;
however,  that no Lien  shall be granted  on any  Property  to secure the Senior
Credit  Agreement or the Second Lien Term Loan Agreement unless the Lien is also
being  granted to secure the  Indebtedness,  this  Agreement  and the other Loan
Documents.

                (i)  Liens  on  Property  not  constituting  collateral  for the
Indebtedness  and not  otherwise  permitted  by the  foregoing  clauses  of this
Section 9.03;  provided that the aggregate  principal or face amount of all Debt
secured under this Section 9.03(i) shall not exceed $2,000,000 at any time.

        Section 9.04   Dividends and Distributions.
                       ---------------------------

               Restricted Payments. Neither of the Borrowers will or will permit
any of their 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 Company 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  (including Cherokee) may declare
and pay  dividends  ratably with respect to their Equity  Interests,  (iii) such
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,  (iv) such  Borrower  may  terminate  its  directors'  or
employees'  option  agreements or restricted  stock agreements under any of such
Borrower's incentive stock

                                       55
<PAGE>

plans  provided;  however,  that the  aggregate  amounts paid by the Borrower in
respect thereof do not exceed $1,000,000.

        Section 9.05  Investments,  Loans and Advances.  The Borrowers 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) Investments  reflected in the Financial  Statements or which
are disclosed to the Lenders in Schedule 9.05;

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

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

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

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

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

                (g)  Investments  (i)  made  by  either  Borrower  in or to  any
Subsidiary, or (ii) made by any Subsidiary in or to either Borrower or any other
Subsidiary,  or (iii) made by either  Borrower  or any  Subsidiary  in or to any
entity that upon the making of such Investment would become a Subsidiary;

                (h) subject to the limits in Section 9.07, 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;

                (i) loans or advances to employees, officers or directors in the
ordinary  course of business of either Borrower or any of its  Subsidiaries,  in
each case only as  permitted by  applicable  law,  including  Section 402 of the
Sarbanes  Oxley Act of 2002,  but in any event  not to  exceed  $100,000  in the
aggregate at any time; and

                                       56
<PAGE>

                (j) Investments in stock,  obligations or securities received in
settlement of debts arising from  Investments  permitted under this Section 9.05
owing to either  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 either Borrower or any of its  Subsidiaries;
provided that such 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(j) exceeds $1,000,000;

                (k)  consideration  received  in connection with permitted asset
sales.

                (l) lease,  utility and similar  deposits in the ordinary course
of business.

                (m) Investments in permitted Swap Agreements.

        Section 9.06 Nature of Business;  International  Operations.  Neither of
the Borrowers nor any  Subsidiary  will allow any material  change to be made in
the  character  of its  business  as an  independent  oil and  gas  exploration,
production and gathering  company or will acquire or make any other  expenditure
(whether such expenditure is capital,  operating or otherwise) in or related to,
any Oil and Gas Properties not located within the geographical boundaries of the
United States.

        Section 9.07 Limitation on Leases.  Neither  Borrower nor any Subsidiary
will create,  incur, assume or suffer to exist any obligation for the payment of
rent or hire of Property of any kind whatsoever  (real or personal but excluding
Capital  Leases  and  leases  of  Hydrocarbon  Interests,   pipeline  leases  or
compressor  leases),  under  leases or lease  agreements  which  would cause the
aggregate  amount of all payments  made by the  Borrowers  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  $5,000,000  in any
period of twelve consecutive calendar months during the life of such leases.

        Section  9.08  Proceeds  of Notes.  The  Borrowers  will not  permit the
proceeds of the Loans to be used for any purpose  other than those  permitted by
Section  7.22.  Neither the  Borrowers nor any Person acting on behalf of either
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
Borrowers 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.

                                       57
<PAGE>

        Section  9.09  ERISA   Compliance.   None  of  the   Borrowers  and  the
Subsidiaries will at any time:

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

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

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

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

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

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

                (g)  acquire,  or permit  any ERISA  Affiliate  to  acquire,  an
interest in any Person that causes such Person to become an ERISA Affiliate with
respect  to  either  Borrower  or a  Subsidiary  or with  respect  to any  ERISA
Affiliate of either Borrower or a Subsidiary if such Person sponsors,  maintains
or  contributes  to,  or at any  time  in the  six-year  period  preceding  such
acquisition has sponsored,  maintained, or contributed to, (1) any Multiemployer
Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the
actuarial  present value of the benefit  liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination  basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities.

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

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<PAGE>

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

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

        Section  9.10 Sale or Discount of  Receivables.  Except for  receivables
obtained by either  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,  neither Borrower nor any Subsidiary
will discount or sell (with or without  recourse) any of its notes receivable or
accounts receivable.

        Section 9.11 Mergers,  Etc.  Neither  Borrower  will, or will permit any
Subsidiary  to, merge into 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 either  Borrower  (provided  that such Borrower  shall be the continuing or
surviving  entity) or any other Subsidiary and 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 Borrowers  will not, and will not
permit any Subsidiary to, sell, assign,  farm-out,  convey or otherwise transfer
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; (c) the sale or transfer of equipment that is no longer necessary
for the  business  of either  Borrower  or such  Subsidiary  or is  replaced  by
equipment  of at  least  comparable  value  and  use;  (d) the  sale,  or  other
disposition  (including  Casualty  Events)  of any Oil and Gas  Property  or any
interest therein or any Subsidiary owning Oil and Gas Properties;  provided that
(i) the  consideration  received  in respect  of such sale or other  disposition
shall be cash, (ii) the consideration  received in respect of such sale or other
disposition  shall be equal to or greater  than the fair market value of the Oil
and Gas Property  interest therein or Subsidiary  subject of such sale, lease or
other disposition (as reasonably  determined by the Board of Directors of either
Borrower and, if requested by the  Administrative  Agent,  the  Borrowers  shall
deliver a certificate of a Responsible  Officer of either Borrower certifying to
that effect);  provided that if a "Borrowing  Base"  deficiency under the Senior

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<PAGE>

Credit  Agreement  shall  exist,  then the Lenders  agree that fair market value
shall have been  obtained if any of the  following  conditions  are met: (1) the
Majority Lenders have consented, such consent not to be unreasonably withheld or
delayed, to such sale, lease or other disposition,  (2) the sale, lease or other
disposition  occurs  pursuant to an auction held in accordance  with  procedures
that are  ordinary  and  customary  in the oil and gas industry or (3) the sale,
lease  or  other  disposition  occurs  pursuant  to a  non-binding  bid  process
conducted by the Borrowers or a regionally or nationally  recognized oil and gas
asset  disposition  advisory  company in  accordance  with  procedures  that are
customary  in the oil and gas  industry,  (iii) at such  time and  after  giving
effect to such sale,  lease or other  disposition,  no Borrowing Base deficiency
under the Senior Credit Agreement shall exist, provided, that the condition that
no Borrowing Base  deficiency  under the Senior Credit  Agreement shall exist at
the time of any such  sale,  lease or other  disposition  shall not apply if the
Borrowers notify the  Administrative  Agent that proceeds of such sale, lease or
other  disposition shall be used to remedy a Borrowing Base deficiency under the
Senior  Credit  Agreement  and the Borrowers in fact use such proceeds to remedy
such Borrowing Base deficiency, to the extent thereof, with any surplus proceeds
being  used for one or more of the  purposes  permitted  by  clause  (v) of this
Section 9.12(d),  (iv) if such sale or other disposition of Oil and Gas Property
or  Subsidiary  owning  Oil and Gas  Properties  included  in the most  recently
delivered Reserve Report during any period between two successive determinations
of PV-10 is sold for a price in excess of 5% of the Borrowing Base of the Senior
Credit  Agreement,  individually  or in the  aggregate,  then the PV-10 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 (v) an amount equal to 100% of the net proceeds received from
such  sale,  lease or other  disposition  shall be used  within 120 days of such
disposition: (1) to acquire Property, plant and equipment or any business entity
used  or  useful  in  carrying  on the  business  of  the  Borrowers  and  their
Subsidiaries  and having a fair  market  value at least equal to the fair market
value of the Properties sold,  leased or otherwise  disposed of or to improve or
replace any existing  Property of the Borrowers and their  Subsidiaries  used or
useful in carrying on the business of the Borrowers and their Subsidiaries,  (2)
to repay or retire  Debt under the Senior  Credit  Agreement  (with a  permanent
reduction in the commitments thereunder),  (3) to repay or retire Debt under the
Second Lien Term Loan  Agreement  or (4) to prepay the Loans;  and (e) sales and
other  dispositions of Properties not regulated by Section 9.12(a) to (d) having
a fair market value not to exceed $1,000,000 during any 12-month period.

        Section 9.13 Environmental Matters. The Borrowers 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 any Remedial Work under any Environmental  Laws, assuming disclosure
to the applicable  Governmental Authority of all relevant facts,  conditions and
circumstances,  if any,  pertaining  to such Property  where such  violations or
remedial  obligations  could  reasonably be expected to have a Material  Adverse
Effect.

        Section 9.14 Transactions  with Affiliates.  The Borrowers 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

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<PAGE>

Affiliate (other than between and among Borrowers and Wholly-Owned  Subsidiaries
of either 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 other than (a) Investments  under Section 9.05(i),  (b) reasonable and
customary director,  officer and employee  compensation  (including bonuses) and
other benefits  (including  retirement,  health,  stock option and other benefit
plans) and indemnification  arrangements,  in each case approved by the Board of
Directors,   and  (c)  any   transaction   with  an  Affiliate  where  the  only
consideration paid is capital stock that is not Disqualified Capital Stock.

        Section 9.15  Subsidiaries.  The Borrowers will not, and will not permit
any Subsidiary  to, create or acquire any  Subsidiary  unless the Borrowers give
written notice to the  Administrative  Agent of such creation or acquisition and
complies  with Section 8.14.  The Borrowers  shall not, and shall not permit any
Subsidiary to, sell,  assign or otherwise dispose of any Equity Interests in any
Subsidiary except in compliance with Section 9.12(d).

        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 Security  Instruments,  Liens permitted by Section 9.03(c),  the
Intercreditor  Agreement,  the Senior Credit  Agreement and the Second Lien Term
Loan  Agreement  or listed  on  Schedule  7.14)  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 a 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
Borrowers will not allow gas imbalances,  take-or-pay or other  prepayments with
respect to the Oil and Gas Properties of either  Borrower or any Subsidiary that
would require such Borrower or such  Subsidiary to deliver  Hydrocarbons at some
future time without then or thereafter receiving full payment therefor to exceed
1.5 bcf of gas (on an mcf equivalent basis) in the aggregate.

        Section  9.18 Swap  Agreements.  The  Borrowers  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  (as shown in the Borrowers'  most recent Reserve  Report)
from proved,  developed,  producing Oil and Gas Properties 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

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<PAGE>

(when  aggregated  with all other Swap  Agreements  of the  Borrowers  and their
Subsidiaries then in effect effectively  converting interest rates from fixed to
floating)  do not exceed  50% of the then  outstanding  principal  amount of the
Borrowers' 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  Borrowers  and their  Subsidiaries  then in effect  effectively  converting
interest rates from floating to fixed) do not exceed 75% of the then outstanding
principal  amount of the Borrowers' Debt for borrowed money which bears interest
at a floating rate, and (c) Swap Agreements required under Section 6.01(n) or as
provided in the Swap  Agreements  listed on Schedule 7.21. In no event shall any
Swap Agreement contain any requirement,  agreement or covenant for the Borrowers
or any Subsidiary to post collateral or margin to secure their obligations under
such Swap Agreement or to cover market exposures, except to the extent permitted
by Section 9.03(d).

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

                (b) the Borrowers  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  Borrowers 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 in any material respect when made or deemed made.

                (d) the  Borrowers  or any  Subsidiary  shall fail to observe or
perform any  covenant,  condition  or agreement  contained  in Section  8.01(i),
Section 8.01(m), Section 8.02, Section 8.03, Section 8.15 or in ARTICLE IX.

                (e) the  Borrowers  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 30 days  after the  earlier to occur of (A)  notice  thereof  from the
Administrative Agent to the Borrowers

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<PAGE>

(which  notice will be given at the request of any Lender) or (B) a  Responsible
Officer of either Borrower or such Subsidiary has Knowledge of such default.

                (f) the  Borrowers  or any  Subsidiary  shall  fail to make  any
payment  (whether of principal or interest and  regardless of amount) in respect
of any Material  Indebtedness prior to the longer of (i) three (3) Business Days
after the same  shall  become  due and  payable  or (ii) the  expiration  of any
applicable  grace or notice and cure  period,  except that with respect to trade
payables,  Borrowers and their Subsidiaries shall have 60 days after due date to
make payment.

                (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 require either  Borrower or any Subsidiary to make
an offer in  respect  thereof,  except  that  with  respect  to trade  payables,
Borrowers  and  their  Subsidiaries  shall  have 60 days  after due date to make
payment.

                (h)  an  involuntary   proceeding   shall  be  commenced  or  an
involuntary  petition shall be filed seeking (i) liquidation,  reorganization or
other relief in respect of either 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 either  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) either  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 either  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.

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

                (k) one or  more  judgments  for  the  payment  of  money  in an
aggregate  amount  in  excess  of  $2,250,000  (to the  extent  not  covered  by
independent  third party insurance  provided by insurers as to which the insurer
does not dispute coverage and is

                                       63
<PAGE>

not  subject to an  insolvency  proceeding)  shall be  rendered  against  either
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 either  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  either  Borrower  or a  Subsidiary  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
either Borrower or any Subsidiary or any of their  Affiliates  shall so state in
writing.

                (m) 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  Borrowers,  any  party  thereto  or holder of the Debt
governed thereby or shall be repudiated by any of them.

                (n) an ERISA Event shall have  occurred  that, in the opinion of
the Majority Lenders,  when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of either Borrower
or any Subsidiary in an aggregate amount exceeding $1,750,000.

                (o) a Change in Control shall occur.

        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,  at the  direction  of the  Majority  Lenders,  shall,  by  notice to the
Borrowers,  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, if any, 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 Borrowers and the  Subsidiaries  accrued  hereunder and under
the Loans, the Notes, if any, and the other Loan Documents  (including,  without
limitation,  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  Borrowers  and each
Subsidiary;  and in case of an Event of Default  described in Section  10.01(h),
Section  10.01(i) or Section  10.01(j),  the Notes, if any, and the principal of
the Loans then outstanding,  together with accrued interest thereon and all fees
and the other  obligations of the Borrowers and Subsidiaries  accrued  hereunder
and under the Loans,

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<PAGE>

the Notes, if any, and the other Loan Documents,  shall automatically become due
and payable,  without presentment,  demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers and each Subsidiary.

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

                (c)  All  proceeds   realized  from  the  liquidation  or  other
disposition  of collateral or otherwise  received  after  maturity of the Loans,
whether by  acceleration  or otherwise,  shall be applied as provided in Section
4.01(d).

                                   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 enter into the Intercreditor Agreement on behalf of such
Lender  (each  Lender  hereby   agreeing  to  be  bound  by  the  terms  of  the
Intercreditor  Agreement  as if it were a party  thereto) and to take such other
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,  (b) the Administrative Agent shall not have any 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 Borrowers or
any of  their  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 either
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

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<PAGE>

existence,  value,  perfection  or  priority of any  collateral  security or the
financial or other  condition of the  Borrowers  and their  Subsidiaries  or any
other obligor or guarantor, or (vii) any failure by either Borrower or any other
Person (other than itself) to perform any of its obligations  hereunder or under
any other Loan  Document or the  performance  or  observance  of any  covenants,
agreements or other terms or conditions set forth herein or therein.

        Section 11.03 Action by Administrative  Agent. The Administrative  Agent
shall  not have  any  duty to take any  discretionary  action  or  exercise  any
discretionary   powers,   except   discretionary  rights  and  powers  expressly
contemplated  hereby  that the  Administrative  Agent is required to exercise in
writing as directed by the 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,
except for its own gross negligence or willful misconduct.

        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
Borrowers 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

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Agent may consult  with legal  counsel  (who may be counsel for the  Borrowers),
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 the Note,  if any,  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 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 Borrowers,  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,  with the
consent of the Borrowers,  which consent shall not be  unreasonably  withheld or
delayed,  to appoint a successor.  If no successor  shall have been so appointed
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. 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 Borrowers to a successor  Administrative  Agent shall be the same
as  those  payable  to its  predecessor  unless  otherwise  agreed  between  the
Borrowers  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  Agent,  its  sub-agents  and  their
respective  Related  Parties in respect  of any  actions  taken or omitted to be
taken by any of them while it was acting as Administrative Agent.

        Section 11.07  Administrative Agent as a Lender. Each bank 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
either of the Borrowers or any  Subsidiary or other  Affiliate  thereof as if it
were not an Administrative Agent hereunder.

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<PAGE>

        Section  11.08  No  Reliance.  Each  Lender  acknowledges  that  it has,
independently  and without reliance upon the  Administrative  Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit  analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party.  Each Lender also  acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such  documents and  information as it shall from time
to time deem  appropriate,  continue to make its own  decisions in taking or not
taking action under or based upon this Agreement,  any other Loan Document,  any
related  agreement  or any  document  furnished  hereunder  or  thereunder.  The
Administrative Agent shall not be required to keep themselves informed as to the
performance or observance by either 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 Borrowers (or any
of their Affiliates)  which may come into the possession of such  Administrative
Agent or any of its Affiliates.  In this regard,  each Lender  acknowledges that
each of Sidley  Austin  Brown & Wood LLP and Haynes and Boone,  LLP is acting in
this  transaction  as  special  counsel to the  Arranger  only in respect of the
Senior Credit Agreement. Each other party hereto will consult with its own legal
counsel  to the  extent  that it deems  necessary  in  connection  with the Loan
Documents and the matters contemplated therein.

        Section 11.09 Authority of  Administrative  Agent to Release  Collateral
and Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan  Documents.  Each Lender  hereby  authorizes  the  Administrative  Agent to
execute and deliver to the Borrowers,  at the Borrowers'  sole cost and expense,
any and all  releases of Liens,  termination  statements,  assignments  or other
documents  reasonably  requested by the Borrowers 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. The Lenders hereby authorize the Administrative Agent, at
its option and in its discretion,  to release any Lien granted to or held by the
Administrative   Agent  upon  any  Mortgaged   Property  (i)  upon  payment  and
satisfaction  of  all of  the  Indebtedness  (other  than  contingent  indemnity
obligations and  Indebtedness in respect of Swap Agreements) at any time arising
under or in respect of this Agreement or the Loan Documents or the  transactions
contemplated  hereby or thereby;  (ii) as permitted  by, but only in  accordance
with,  the  terms  of the  applicable  Loan  Document;  or  (iii)  if  approved,
authorized or ratified in writing by the Majority  Lenders,  unless such release
is required to be approved by all of the Lenders hereunder.

        Section  11.10  The  Arranger.   The  Arranger  shall  have  no  duties,
responsibilities  or  liabilities  under  this  Agreement  and  the  other  Loan
Documents.

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<PAGE>

                                  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  Borrowers,  to  them  at  Quest  Resource
Corporation,  9520 North May Avenue,  Suite 300, Oklahoma City,  Oklahoma 73120,
Attention:  David Grose  (Telecopy No. (405)  488-1156),  with a copy to Stinson
Morrison  Hecker LLP,  1201 Walnut,  Kansas  City,  Missouri  64106,  Attention:
Patrick J. Respeliers (Telecopy No. (888) 215-7160);

                        (ii) if to the Administrative Agent, to it at Guggenheim
Partners, 135 East 57th Street, 7th Floor, New York, New York 10022,  Attention:
Tony Minella (Telecopy No. (212) 644-8396); and

                        (iii)  if  to  any  Lender,  to it at  its  address  (or
telecopy number) set forth in its Administrative Questionnaire.

                (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 Borrowers  may, in their  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 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
and

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<PAGE>

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  Borrowers  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 shall not be construed as a waiver of any  Default,  regardless  of whether
the Administrative  Agent or any Lender may have had notice or knowledge of such
Default at the time.

                (b) Neither  this  Agreement  nor any  provision  hereof nor any
Security Instrument nor any provision thereof may be waived, amended or modified
except  pursuant to an agreement or  agreements  in writing  entered into by the
Borrowers and the Majority  Lenders or by the  Borrowers and the  Administrative
Agent with the consent of the Majority Lenders;  provided that no such agreement
shall (i) increase the Commitment of any Lender  without the written  consent of
such Lender,  (ii) modify the  definition  of PV-10  without the consent of each
Lender,  (iii)  reduce  the  principal  amount of the Loan 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 the Loan,  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 Maturity 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 6.01,
Section  8.14,  or  Section  10.02(c),  or  change  the  definition  of the term
"Subsidiary",  without the written  consent of each  Lender,  (vii)  release any
Guarantor (except as set forth in the Guaranty Agreement), release a substantial
portion of the collateral  (other than as provided in Section 11.09),  or reduce
the percentage  set forth in Section 8.14 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 definition 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  hereunder  or under any other Loan  Document  without the
prior  written  consent  of  the  Administrative   Agent.   Notwithstanding  the
foregoing,  any  supplement to Schedule 7.15  (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.
                       ----------------------------------

                (a) The  Borrowers  jointly and  severally  agree to pay (i) all
reasonable  out-of-pocket  expenses incurred by the Administrative Agent and its
Affiliates,  including,

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<PAGE>

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,
including all  Intralinks  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 costs,  expenses,  Taxes,  assessments  and other  charges  incurred  by the
Administrative Agent or any Lender in connection with any filing,  registration,
recording or perfection of any security interest  contemplated by this Agreement
or any Security Instrument or any other document referred to therein,  (iii) all
reasonable  out-of-pocket  expenses incurred by the Administrative  Agent or any
Lender,  including the reasonable fees, charges and disbursements of any counsel
for the  Administrative  Agent or any Lender, in connection with the enforcement
or protection of its rights in connection  with this Agreement or any other Loan
Document,  including its rights under this Section 12.03,  or in connection with
the Loans made hereunder,  including,  without  limitation,  all such reasonable
out-of-pocket   expenses   incurred   during  any  workout,   restructuring   or
negotiations in respect of such Loans.

                (b) THE BORROWERS SHALL INDEMNIFY THE ADMINISTRATIVE  AGENT, THE
ARRANGER,  AND EACH  LENDER,  AND  EACH  RELATED  PARTY OF ANY OF THE  FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE")  AGAINST,  AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,  DAMAGES,  LIABILITIES AND
RELATED EXPENSES,  INCLUDING THE FEES,  CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE,  INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE  ARISING OUT
OF, IN CONNECTION  WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY,  THE  PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE  OBLIGATIONS  HEREUNDER OR THEREUNDER OR
THE  CONSUMMATION OF THE TRANSACTIONS  CONTEMPLATED  HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWERS 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 BORROWERS OR ANY  SUBSIDIARY SET FORTH IN ANY OF THE
LOAN  DOCUMENTS OR ANY  INSTRUMENTS,  DOCUMENTS OR  CERTIFICATIONS  DELIVERED IN
CONNECTION  THEREWITH,  (iv) ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM,  (v)
ANY OTHER ASPECT OF THE LOAN  DOCUMENTS,  (vi) THE OPERATIONS OF THE BUSINESS OF
THE BORROWERS AND THEIR  SUBSIDIARIES  BY THE

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<PAGE>

BORROWERS AND THEIR 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 EITHER BORROWER OR ANY SUBSIDIARY OR
ANY OF ITS PROPERTIES,  INCLUDING WITHOUT LIMITATION, THE PRESENCE,  GENERATION,
STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,  DISPOSAL,  ARRANGEMENT OF
DISPOSAL OR  TREATMENT  OF OIL,  OIL AND GAS WASTES,  SOLID  WASTES OR HAZARDOUS
SUBSTANCES  ON ANY OF THEIR  PROPERTIES,  (ix) THE BREACH OR  NON-COMPLIANCE  BY
EITHER BORROWER OR ANY SUBSIDIARY WITH SUCH ENVIRONMENTAL LAW APPLICABLE TO SUCH
BORROWER OR ANY  SUBSIDIARY,  (x) THE PAST  OWNERSHIP  BY SUCH  BORROWER OR SUCH
SUBSIDIARY OF ANY OF ITS  PROPERTIES  OR PAST ACTIVITY ON ANY OF ITS  PROPERTIES
WHICH,  THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY,  (xi) THE  PRESENCE,  USE,  RELEASE,  STORAGE,  TREATMENT,  DISPOSAL,
GENERATION,   THREATENED  RELEASE,  TRANSPORT,   ARRANGEMENT  FOR  TRANSPORT  OR
ARRANGEMENT  FOR DISPOSAL OF OIL, OIL AND GAS WASTES,  SOLID WASTES OR HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES  OWNED OR OPERATED BY EITHER  BORROWER
OR ANY  SUBSIDIARY  OR ANY ACTUAL OR ALLEGED  PRESENCE  OR RELEASE OF  HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY EITHER 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.

                (c) To the  extent  that the  Borrowers  fail to pay any  amount
required to be paid by it to the Administrative  Agent under Section 12.03(a) or
(b),  each  Lender  severally  agrees to pay to the  Administrative  Agent  such
Lender's  Percentage  Share

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<PAGE>

(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 in its
capacity as such.

                (d) To the extent  permitted by  applicable  law, the  Borrowers
shall not assert,  and hereby waive,  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,  or any Loan or the
use of the proceeds thereof.

                (e) All  amounts due under this  Section  12.03 shall be payable
not later than 10 Business Days 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  Borrowers  may not  assign or
otherwise  transfer any of their  rights or  obligations  hereunder  without the
prior written  consent of each Lender (and any attempted  assignment or transfer
by the Borrowers 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 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 or delayed) of:

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

                                (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, an Affiliate of a Lender or an Approved Fund.

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

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<PAGE>

                                (A)  except  in the case of an  assignment  to a
Lender or an Affiliate of a Lender or an Approved  Fund 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  $5,000,000  unless  each of the  Borrowers  and the  Administrative  Agent
otherwise  consent,  provided  that no such  consent of the  Borrowers  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 provided, that no processing and
recording  fee shall be due or payable in  connection  with an  assignment  to a
Lender, an Affiliate of a Lender or an Approved Fund; and

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

                        (iii) Subject to Section 12.04(b)(iv) and the acceptance
and  recording  thereof,  from and after the  effective  date  specified in each
Assignment and Assumption the assignee  thereunder  shall be a party hereto and,
to the extent of the interest  assigned by such Assignment and Assumption,  have
the rights and obligations of a Lender under this  Agreement,  and the assigning
Lender  thereunder  shall,  to the  extent  of the  interest  assigned  by  such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption  covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party  hereto but shall  continue to be entitled to the benefits of Section
5.01,  Section  5.02,  Section  5.03  and  Section  12.03  and  subject  to  the
obligations  under  Section  5.04).  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  Borrowers,  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  Commitments  and
principal  amount of the Loans,  each Lender  pursuant to the terms  hereof from
time to time (the "Register").  The entries in the Register shall be conclusive,
and the  Borrowers,  the  Administrative  Agent,  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 Borrowers

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<PAGE>

and any Lender,  at any  reasonable  time and from time to time upon  reasonable
prior notice.

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

                (c) (i) Any Lender may,  without the consent of the Borrowers or
the  Administrative  Agent,  sell  participations  to one or more banks or other
entities  (a  "Participant")  in all or a portion  of such  Lender's  rights and
obligations  under this Agreement  (including all or a portion of its Commitment
and the Loans owing to it);  provided that (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 Borrowers,  the  Administrative  Agent,  and the other Lenders shall
continue to deal solely and directly  with such Lender in  connection  with such
Lender's  rights  and  obligations  under  this  Agreement.   Any  agreement  or
instrument  pursuant to which a Lender sells such a participation  shall provide
that such Lender shall retain the sole right to enforce  this  Agreement  and to
approve  any  amendment,  modification  or  waiver  of  any  provision  of  this
Agreement;  provided  that such  agreement or  instrument  may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification  or waiver  described in the proviso to Section  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 Borrowers agree 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(b).
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 Borrowers'  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 Borrowers are notified of the participation sold to such
Participant and such Participant  agrees,  for the benefit of the Borrowers,  to
comply with Section 5.03(e) as though it were a Lender.

                        (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

                                       75
<PAGE>

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 and subject to the  obligations
under  Section  5.04).  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).

                (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 Borrowers 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  Borrowers  herein  and in the  certificates  or  other  instruments
delivered  in  connection  with or pursuant to this  Agreement or any other Loan
Document  shall be  considered  to have been  relied  upon by the other  parties
hereto and shall survive the  execution  and delivery of this  Agreement and the
making of any  Loans,  regardless  of any  investigation  made by any such other
party or on its behalf and notwithstanding that the Administrative Agent, or any
Lender  may  have  had  notice  or   knowledge   of  any  Default  or  incorrect
representation  or warranty at the time any credit is  extended  hereunder,  and
shall  continue  in full  force and  effect as long as the  principal  of or any
accrued  interest on any Loan or any fee or any other amount  payable under this
Agreement is outstanding  and unpaid.  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  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

                                       76
<PAGE>

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
Borrowers  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.
                       ----------------------------------------

                (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

                                       77
<PAGE>

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 Borrowers or any  Subsidiary  against
any of and all the  obligations of the Borrowers 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,  IF ANY, SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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

                (c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS  SPECIFIED  IN  SECTION  12.01 OR SUCH  OTHER  ADDRESS  AS IS  SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS  ASSIGNMENT AND  ASSUMPTION),  SUCH SERVICE TO
BECOME  EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT
THE  RIGHT OF A PARTY OR ANY  HOLDER OF ANY 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.

                                       78
<PAGE>

                (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  OR AGENT OF  COUNSEL  FOR ANY PARTY  HERETO HAS
REPRESENTED,  EXPRESSLY OR  OTHERWISE,  OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE  EVENT OF  LITIGATION,  SEEK TO  ENFORCE  THE  FOREGOING  WAIVERS,  AND (iv)
ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED TO ENTER INTO THIS  AGREEMENT,  THE LOAN
DOCUMENTS AND THE TRANSACTIONS  CONTEMPLATED  HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

        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,  (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 (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) or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Agreement  relating to the Borrowers and their obligations
(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),  (g) with the consent of the Borrowers 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  nonconfidential  basis  from a source
other than the Borrowers. For the purposes of this Section 12.11,  "Information"
means all

                                       79
<PAGE>

information  received  from the  Borrowers  or any  Subsidiary  relating  to the
Borrowers  or  any  Subsidiary  and  their  businesses,   other  than  any  such
information  that is  available to the  Administrative  Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrowers or a Subsidiary.  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 New York or any other jurisdiction whose laws
may  be  mandatorily   applicable  to  such  Lender  notwithstanding  the  other
provisions of this Agreement),  then, in that event, notwithstanding anything to
the  contrary in any of the Loan  Documents  or any  agreement  entered  into in
connection with or as security for the Loans,  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 Loans,  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  Borrowers);  and (ii) in the  event  that the
maturity  of the Loans,  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  Borrowers).  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 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

                                       80
<PAGE>

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.

        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."

        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
those Lenders or their Affiliates and other Persons which are  counterparties to
any Swap Agreement with either Borrower or any of its Subsidiaries on a pro rata
basis  in  respect  of  any  obligations  of  the  Borrowers  or  any  of  their
Subsidiaries  which arise under any such Swap Agreement  entered into while such
Person or its Affiliate is a Lender,  including any Swap Agreements between such
Persons in existence  prior to the date hereof.  No Lender or any Affiliate of a
Lender shall have any voting  rights under any Loan  Document as a result of the
existence of obligations owed to it under any such Swap Agreements.

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

                                       81
<PAGE>

        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 "Act"),  it is required
to obtain,  verify and record  information that identifies the Borrowers,  which
information includes the name and address of the Borrowers and other information
that will allow such Lender to identify  the  Borrowers in  accordance  with the
Act.

                          [SIGNATURES BEGIN NEXT PAGE]

                                       82
<PAGE>

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

BORROWER:                                QUEST RESOURCE CORPORATION

                                         By:  /s/ Jerry D. Cash
                                              ---------------------------------
                                              Name: Jerry D. Cash
                                              Title: Chief Executive Officer

                                         QUEST CHEROKEE, LLC

                                         By:  /s/ Jerry D. Cash
                                              ---------------------------------
                                              Name: Jerry D. Cash
                                              Title: Chief Executive Officer
<PAGE>

ADMINISTRATIVE AGENT:                   GUGGENHEIM CORPORATE FUNDING, LLC
                                        as Administrative Agent

                                        By:   /s/ Stephen D. Sautel
                                              ---------------------------------
                                              Name:  Stephen D. Sautel
                                              Title  Managing Director
<PAGE>

LENDERS:                              MIDLAND NATIONAL LIFE INSURANCE COMPANY
                                      By:  Midland Advisors Company as its Agent

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

LENDERS:                              NORTH AMERICAN COMPANY FOR LIFE AND HEALTH
                                      INSURANCE
                                      By:  Midland Advisors Company as its Agent

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

LENDERS:                              ORPHEUS HOLDINGS LLC
                                      By:  Guggenheim Investment Management, LLC
                                      as Manager

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

LENDERS:                              ORPHEUS FUNDING LLC
                                      By:  Guggenheim Investment Management, LLC
                                      as Manager

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

LENDERS:                              KENNECOTT FUNDING LTD.
                                      By:  Guggenheim Investment Management, LLC
                                      as Collateral Manager

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

LENDERS:                              SANDS POINT FUNDING LTD.
                                      By:  Guggenheim Investment Management, LLC
                                      as Collateral Manager

                                      By:     /s/ Kaitlyn Trinh
                                              ---------------------------------
                                      Name:   Kaitlyn Trinh
                                      Title:  Director
<PAGE>

<TABLE>
<CAPTION>
                                     ANNEX I

COMMITMENTS

------------------------------------------- --------------------- ----------------------
                                              Percentage Share      Commitment Amount
              Name of Lender
------------------------------------------- --------------------- ----------------------
<S>                                                <C>                 <C>
Orpheus Funding LLC                                73.3%               $55,000,000
------------------------------------------- --------------------- ----------------------
Midland National Life Insurance Company            13.3%               $10,000,000
------------------------------------------- --------------------- ----------------------
North American Company for Life and                 6.7%               $5,000,000
Health Insurance
------------------------------------------- --------------------- ----------------------
Kennecott Funding Ltd.                              2.7%               $2,000,000
------------------------------------------- --------------------- ----------------------
Sands Point Funding Ltd.                            2.7%               $2,000,000
------------------------------------------- --------------------- ----------------------
Orpheus Holdings LLC                                1.3%               $1,000,000
------------------------------------------- --------------------- ----------------------
TOTAL                                             100.00%            $75,000,000.00
------------------------------------------- --------------------- ----------------------
</TABLE>

<PAGE>

                                    EXHIBIT A
                             FORM OF TERM LOAN NOTE

$[          ]                                                 [          ], 2006

        FOR VALUE RECEIVED,  QUEST CHEROKEE,  LLC, a Delaware limited  liability
company and QUEST RESOURCE  CORPORATION,  a Nevada corporation (the "Borrowers")
hereby jointly and severally  promise to pay to the order of [ ] (the "Lender"),
at the principal office of Guggenheim Corporate Funding,  LLC, as administrative
agent (the "Administrative Agent"), at [ ], the principal sum of [ ] Dollars ($[
]), in lawful money of the United States of America and in immediately available
funds,  on the  dates  and in  the  principal  amounts  provided  in the  Credit
Agreement,  and to pay interest on the unpaid  principal amount of such Loan, at
such office,  in like money and funds, for the period  commencing on the date of
such Loan until  such Loan shall be paid in full,  at the rates per annum and on
the dates provided in the Third Lien Term Loan Agreement.

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

        This Note is one of the Notes  referred  to in the Third  Lien Term Loan
Agreement  dated as of June 9, 2006  among  the  Borrowers,  the  Administrative
Agent,  and the other  agents  and  lenders  signatory  thereto  (including  the
Lender), and evidences Loans made by the Lender thereunder (such Third Lien Term
Loan Agreement as the same may be amended, supplemented or restated from time to
time, the "Third Lien Term Loan Agreement"). Capitalized terms used in this Note
have the respective meanings assigned to them in the Credit Agreement.

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

                                    Exhibit A
<PAGE>

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

                               QUEST CHEROKEE, LLC

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                               QUEST RESOURCE CORPORATION

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                                    Exhibit A
<PAGE>

                                    EXHIBIT B
                            FORM OF BORROWING REQUEST

                          [                   ], 200[   ]

        QUEST  CHEROKEE,  LLC, a Delaware  limited  liability  company and QUEST
RESOURCE  CORPORATION,  a Nevada  corporation  (the  "Borrowers"),  pursuant  to
Section  2.03 of the Third  Lien Term  Loan  Agreement  dated as of June 9, 2006
(together with all amendments, restatements,  supplements or other modifications
thereto,  the "Credit  Agreement")  among the  Borrowers,  Guggenheim  Corporate
Funding,  LLC, as  Administrative  Agent and the other  agents and lenders  (the
"Lenders") which are or become parties thereto (unless otherwise defined herein,
each  capitalized term used herein is defined in the Credit  Agreement),  hereby
requests a Borrowing as follows:

        (i)    Aggregate amount of the requested Loan is $[            ];

        (ii) Date of such Loan is [              ], 200[ ];

        (iii) Location and number of the  Borrowers'  account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

        [                           ]
         ---------------------------
        [                           ]
         ---------------------------
        [                           ]
         ---------------------------
        [                           ]
         ---------------------------
        [                           ]
         ---------------------------

                                   Exhibit B
<PAGE>

        The undersigned  certifies that he/she is the [ ] of the Borrowers,  and
that as such he/she is authorized to execute this  certificate  on behalf of the
Borrowers. The undersigned further certifies,  represents and warrants on behalf
of the  Borrowers  that the  Borrowers  is  entitled  to receive  the  requested
Borrowing under the terms and conditions of the Credit Agreement.

                               QUEST CHEROKEE, LLC

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                               QUEST RESOURCE CORPORATION

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                                    Exhibit B
<PAGE>

                                    EXHIBIT C
                                     FORM OF
                             COMPLIANCE CERTIFICATE

        The  undersigned  hereby  certifies  that  he/she  is  the [        ] of
QUEST CHEROKEE,  LLC, a Delaware  limited  liability  company and QUEST RESOURCE
CORPORATION, a Nevada corporation (the "Borrowers"),  and that as such he/she is
authorized  to  execute  this  certificate  on  behalf  of the  Borrowers.  With
reference  to the  Third  Lien  Term  Loan  Agreement  dated as of June 9,  2006
(together with all amendments, restatements,  supplements or other modifications
thereto being the "Credit Agreement") among the Borrowers,  Guggenheim Corporate
Funding,  LLC, as  Administrative  Agent,  and the other agents and lenders (the
"Lenders") which are or become a party thereto,  the undersigned  represents and
warrants as follows (each  capitalized  term used herein having the same meaning
given to it in the Credit Agreement unless otherwise specified):

        (a) The  representations  and  warranties of the Borrowers  contained in
Article VII of the Credit Agreement and in the Loan Documents and otherwise made
in writing by or on behalf of the Borrowers pursuant to the Credit Agreement and
the Loan Documents were true and correct in all material respects when made, and
are  repeated at and as of the time of delivery  hereof and are true and correct
in all material respects at and as of the time of delivery hereof, except to the
extent such  representations  and warranties are expressly limited to an earlier
date  or the  Majority  Lenders  have  expressly  consented  in  writing  to the
contrary.

        (b) The Borrowers  have  performed and complied with all  agreements and
conditions  contained in the Credit Agreement and in the Loan Documents required
to be  performed  or  complied  with by it prior  to or at the time of  delivery
hereof [or specify default and describe].

        (c) Since  [December  31, 2005],  no change has occurred,  either in any
case or in the  aggregate,  in the  condition,  financial or  otherwise,  of the
Borrowers  or any  Subsidiary  which  could  reasonably  be  expected  to have a
Material Adverse Effect [or specify event].

        (d) There exists no Default or Event of Default [or specify  Default and
describe].

        (e) Attached hereto are the detailed computations necessary to determine
whether the Borrowers  are in compliance  with Section 9.01 as of the end of the
[fiscal quarter][fiscal year] ending [ ].

                                   Exhibit C
<PAGE>

        EXECUTED AND DELIVERED this [          ] day of [          ].

                               QUEST CHEROKEE, LLC

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                               QUEST RESOURCE CORPORATION

                               By:
                                    --------------------------------------------
                               Name:
                                      ------------------------------------------
                               Title:
                                       -----------------------------------------

                                    Exhibit C
<PAGE>

                                   EXHIBIT D-1
              FORM OF LEGAL OPINION OF STINSON MORRISON HECKER LLP

                                    Attached.

                                  Exhibit D-1
<PAGE>

                                   EXHIBIT D-2
                     FORM OF LEGAL OPINION OF LOCAL COUNSEL

                                    Attached.

                                  Exhibit D-2
<PAGE>

                                   EXHIBIT E-1
                              SECURITY INSTRUMENTS

1) Guaranty dated as of June 9, 2006 by the Borrowers and the Subsidiaries party
thereto as Guarantors, in favor of the Administrative Agent and the Lenders.

2)  Security  Agreement  dated  as of June  9,  2006  by the  Borrowers  and the
Subsidiaries  party  thereto,  in  favor  of the  Administrative  Agent  and the
Lenders.

3)      Financing Statements in respect of items 1 and 2, by:

           a) the Borrowers; and

           b) the Subsidiary Guarantors.

4) Mortgages and fixture filings required under Section 8.14.

                                  Exhibit E-1
<PAGE>

                                   EXHIBIT E-2
                                FORM OF GUARANTY

                                    Attached.

                                  Exhibit E-2
<PAGE>

                                   EXHIBIT E-3
                           FORM OF SECURITY AGREEMENT

                                    Attached.

                                  Exhibit E-3
<PAGE>

                                   EXHIBIT E-4
                         FORM OF INTERCREDITOR AGREEMENT

                                    Attached.

                                  Exhibit E-4
<PAGE>

                                    EXHIBIT F
                        FORM OF ASSIGNMENT AND ASSUMPTION

               This Assignment and Assumption (the  "Assignment and Assumption")
is dated as of the  Effective  Date set forth  below and is entered  into by and
between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee]
(the  "Assignee").  Capitalized terms used but not defined herein shall have the
meanings  given to them in the Third Lien Term Loan Agreement  identified  below
(as  amended,  the  "Credit  Agreement"),  receipt  of a copy of which is hereby
acknowledged  by the Assignee.  The Standard  Terms and  Conditions set forth in
Annex 1  attached  hereto  are  hereby  agreed  to and  incorporated  herein  by
reference  and made a part of this  Assignment  and  Assumption  as if set forth
herein in full.

               For an agreed  consideration,  the  Assignor  hereby  irrevocably
sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases
and assumes from the Assignor,  subject to and in  accordance  with the Standard
Terms and Conditions and the Credit Agreement, as of the Effective Date inserted
by the  Administrative  Agent as  contemplated  below (i) all of the  Assignor's
rights and  obligations  in its capacity as a Lender under the Credit  Agreement
and any other documents or instruments  delivered pursuant thereto to the extent
related to the amount and percentage  interest  identified  below of all of such
outstanding  rights  and  obligations  of  the  Assignor  under  the  respective
facilities  identified  below  (including  any letters of credit and  guarantees
included in such  facilities)  and (ii) to the extent  permitted  to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person,  whether known or
unknown,  arising under or in connection  with the Credit  Agreement,  any other
documents or instruments  delivered  pursuant  thereto or the loan  transactions
governed  thereby  or in any way based on or  related  to any of the  foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations  sold
and assigned  pursuant to clause (i) above (the rights and obligations  sold and
assigned  pursuant  to  clauses  (i) and (ii)  above  being  referred  to herein
collectively  as the "Assigned  Interest").  Such sale and assignment is without
recourse to the Assignor and,  except as expressly  provided in this  Assignment
and Assumption, without representation or warranty by the Assignor.

1.    Assignor:             ______________________________

2.    Assignee:             ______________________________
                            [and is an Affiliate/Approved Fund of
                            [identify Lender](1)]

3.    Borrowers:            Quest Cherokee,  LLC and Quest Resource Corporation

4.    Administrative Agent: Guggenheim Corporate Funding, LLC, as the
                            administrative  agent under the Credit Agreement

5.    Credit   Agreement:   The  Third Lien Term Loan Agreement dated as of
                            June 9, 2006 among Quest Cherokee, LLC and Quest
                            Resource Corporation, the Lenders parties  thereto,
                            Guggenheim Corporate Funding, LLC, as Administrative
                            Agent, and the other agents parties thereto

--------------------
1 Select as applicable.

                                    Exhibit F
<PAGE>

6.     Assigned Interest:

<TABLE>
<CAPTION>
------------------------------------- ---------------------------- ------------------------------
        Aggregate Amount of           Amount of Commitment/Loans      Percentage Assigned of
  Commitment/Loans for all Lenders             Assigned            Commitment/Loans(2)
------------------------------------- ---------------------------- ------------------------------
<S>                                   <C>                          <C>
$                                     $                                           %
------------------------------------- ---------------------------- ------------------------------
$                                     $                                           %
------------------------------------- ---------------------------- ------------------------------
$                                     $                                           %
------------------------------------- ---------------------------- ------------------------------
</TABLE>

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

                                            ASSIGNOR
                                            --------

                                            [NAME OF ASSIGNOR]

                                            By:______________________________
                                               Title:

                                            ASSIGNEE
                                            --------

                                            [NAME OF ASSIGNEE]

                                            By:______________________________
                                               Title:

------------
2 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

                                   Exhibit F
<PAGE>

Consented to and Accepted:

GUGGENHEIM CORPORATE FUNDING, LLC, as
  Administrative Agent

By_________________________________
  Title:

By_________________________________
  Title:

[Consented to:] 3

QUEST CHEROKEE, LLC

By_________________________________
  Title:

QUEST RESOURCE CORPORATION

By_________________________________
  Title:

------------
3 To be added only if the consent of the Borrowers and/or other parties (e.g.
Issuing Bank) is required by the terms of the Credit Agreement.

                                   Exhibit F
<PAGE>

                                                                         ANNEX 1

               QUEST CHEROKEE, LLC AND QUEST RESOURCE CORPORATION
                         THIRD LIEN TERM LOAN AGREEMENT

                        STANDARD TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

               1. Representations and Warranties.
                  ------------------------------

               1.1 Assignor.  The Assignor (a)  represents and warrants that (i)
it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien,  encumbrance  or other adverse claim and
(iii) it has full power and authority,  and has taken all action  necessary,  to
execute and  deliver  this  Assignment  and  Assumption  and to  consummate  the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements,  warranties or  representations  made in or in connection
with the  Credit  Agreement  or any other  Loan  Document,  (ii) the  execution,
legality,  validity,  enforceability,  genuineness,  sufficiency or value of the
Loan Documents or any collateral  thereunder,  (iii) the financial  condition of
the  Borrowers,  any of their  Subsidiaries  or  Affiliates  or any other Person
obligated in respect of any Loan Document or (iv) the  performance or observance
by the Borrowers, any of their Subsidiaries or Affiliates or any other Person of
any of their respective obligations under any Loan Document.

               1.2. Assignee.  The Assignee (a) represents and warrants that (i)
it has full power and authority,  and has taken all action necessary, to execute
and deliver this  Assignment and  Assumption and to consummate the  transactions
contemplated  hereby and to become a Lender under the Credit Agreement,  (ii) it
satisfies the requirements,  if any,  specified in the Credit Agreement that are
required to be  satisfied  by it in order to acquire the  Assigned  Interest and
become a Lender,  (iii) from and after the Effective  Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the extent
of the Assigned  Interest,  shall have the  obligations of a Lender  thereunder,
(iv) it has received a copy of the Credit Agreement, together with copies of the
most recent financial  statements delivered pursuant to Section 7.04(a) thereof,
as  applicable,  and such  other  documents  and  information  as it has  deemed
appropriate  to make its own credit  analysis  and  decision  to enter into this
Assignment and Assumption and to purchase the Assigned  Interest on the basis of
which it has made such analysis and decision  independently and without reliance
on the  Administrative  Agent or any  other  Lender,  and (v) if it is a Foreign
Lender,  attached to the Assignment and Assumption is any documentation required
to be  delivered  by it  pursuant  to the terms of the  Credit  Agreement,  duly
completed  and  executed  by the  Assignee;  and (b)  agrees  that  (i) it will,
independently and without reliance on the Administrative  Agent, the Assignor or
any other Lender,  and based on such documents and  information as it shall deem
appropriate at the time,  continue to make its own credit decisions in taking or
not  taking  action  under  the  Loan  Documents,  and (ii) it will  perform  in
accordance  with their  terms all of the  obligations  which by the terms of the
Loan Documents are required to be performed by it as a Lender.

               2.   Payments.   From  and  after   the   Effective   Date,   the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including  payments  of  principal,  interest,  fees and other  amounts) to the
Assignor for amounts which have accrued to but excluding the Effective  Date and
to the  Assignee for amounts  which have  accrued  from and after the  Effective
Date.

               3. General  Provisions.  This Assignment and Assumption  shall be
binding  upon,  and  inure to the  benefit  of,  the  parties  hereto  and their
respective  successors  and  assigns.  This  Assignment  and  Assumption  may be
executed in any number of  counterparts,  which  together  shall  constitute one

                                    Exhibit F
<PAGE>

instrument.  Delivery of an  executed  counterpart  of a signature  page of this
Assignment  and  Assumption  by  telecopy  shall be  effective  as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption  shall be governed by, and construed in accordance  with, the law
of the State of New York.

                                        Exhibit F
<PAGE>

                                  SCHEDULE 7.04
                                    APPROVALS

[Company to provide]

<PAGE>

                                  SCHEDULE 7.05
                                   LITIGATION

[Company to provide]

<PAGE>

                                  SCHEDULE 7.14
                                      LIENS

[Company to provide]

<PAGE>

                                  SCHEDULE 7.15
                                  SUBSIDIARIES

[Company to provide]

<PAGE>

                                  SCHEDULE 7.19
                                 GAS IMBALANCES

[Company to provide.]

<PAGE>

                                  SCHEDULE 7.20
                               MARKETING CONTRACTS

[Company to provide.]

<PAGE>

                                  SCHEDULE 7.21
                                 SWAP AGREEMENTS

[Company to provide.]

<PAGE>

                                  SCHEDULE 9.05
                                   INVESTMENTS

[Company to provide.]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]