Document:

Purchase and Sale Agreement

    EXHIBIT
      10.9

     

    PURCHASE
      AND SALE
      AGREEMENT

    
      
        

        This
          Purchase and Sale Agreement (“Agreement”) dated as of December 11, 2006, is by
          and between Eagle Operating Inc. (“Seller”), whose address is P.O. Box 853,
          Kenmare, North Dakota 58746, a North Dakota corporation and Petro Resources
          Corporation, a Delaware corporation, whose address 5100 Westheimer, Suite
          200,
          Houston, Texas 77056 (“Buyer”), relative to the “Properties”(as hereinafter
          defined).

         

        In
          consideration of the mutual promises contained herein, the benefits to
          be
          derived by each party hereunder and other good and valuable consideration,
          the
          receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
          agree
          as follows:

         

        ARTICLE
          I

         

        PURCHASE
          AND SALE

         

        Purchase
          and Sale.
          Seller
          agrees to sell and convey and Buyer agrees to purchase and pay for the
          Properties (with the exception of the Excluded Assets defined in 1.02 below)
          subject to the terms and conditions of this Agreement.

         

        
          
            	    1.01  	
                    Properties.
                      All of the following shall be referred to as the “Properties” (use of the
                      term “Property” is intended to refer to one or more of the Properties,
                      depending upon the context within which such term is
                      used);

                  

          

        

        

        
          
            	    (a)         
                     	
                    An
                      undivided fifty percent (50%) of Seller’s right, title and interest in the
                      oil and gas wells, saltwater disposal and water wells and injection
                      wells
                      (whether or not currently producing) (the “Wells”) and the lands upon
                      which the Wells are located as described in Exhibit “A” hereto (“Lands”,
                      together with a like share of Seller’s interest in and to (i) all leases,
                      mineral interests, and other oil and gas properties (“Leases”) and all
                      rights, privileges, benefits and powers conferred upon the
                      holder of the
                      Leases with respect to the use and occupation of the surface
                      of the Lands
                      that may be necessary, convenient or incidental to the possession
                      and
                      enjoyment of the Leases, (ii) all rights in respect of any
                      pooled or
                      unitized acreage located in whole or in part within the Lands
                      by virtue of
                      the Leases, including rights to production from the pool or
                      unit allocated
                      to any Leases being a part thereof, regardless of whether such
                      production
                      is from the Lands covered by the Lease(s), (iii) all rights,
                      options,
                      titles and interests within the Lands subject to the Leases
                      irrespective
                      of how earned, and (iv) all tenements, hereditaments and appurtenances
                      belonging to any of the foregoing;

                  

          

        

        
          
            	
                        (b)         
                               

                  	
                    A
                      like interest in and to all of the personal property, fixtures
                      and
                      improvements now or as of the Effective Time (as defined in
                      Section 1.03
                      below) on the Lands associated with the Leases, appurtenant
                      thereto or
                      used in connection therewith or with the production, treatment,
                      sale or
                      disposal of hydrocarbons or water produced therefrom or attributable
                      thereto and all other appurtenances thereunto belonging, whether
                      or not
                      located on the Leases;

                  

          

        

        
          
            	
                        (c)         
                      

                  	
                    A
                      like interest in and to all contracts and contractual rights,
                      obligations
                      and Properties, including all farmout agreements, farmin agreements,
                      drilling contracts, operating agreements, unit agreements,
                      sales
                      contracts, saltwater disposal agreements, division orders and
                      transfer
                      orders and other contracts or agreements covering or affecting
                      any or all
                      of the Leases and/or Lands; 

                  

          

        

        
          
            	
                        (d)         
                           

                  	
                    A
                      like interest in and to all easements, licenses, authorizations,
                      permits
                      and similar rights and Properties applicable to, or pertinent
                      to, the
                      ownership and operation of the
                      Wells;

                  

          

        

        
          
            	
                        (e)         
                      

                  	
                    A
                      like interest in and to all oil, condensate, natural gas, natural
                      gas
                      liquids and all other minerals, whether similar or dissimilar
                      in nature,
                      produced on or after the Effective Time, together with all
                      inventories,
                      oil, gas and production in tanks, in storage below the pipeline
                      connection
                      in tanks or upstream of the sales meter (“line fill”) and inventory
                      attributable to the Leases;
                      and

                  

          

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          
            	    (f)          
                    	
                    A
                      like interest in and to all files (originals or copies), records,
                      documentation and data of Seller relating to (or evidencing)
                      Seller’s
                      ownership or rights in the Leases, Lands, production, rights-of-way
                      or
                      other rights and Properties described herein, including but
                      not limited to
                      lease files, land files, well files, accounting files, production
                      sales
                      agreements files, division order files, title opinions and
                      abstracts,
                      legal records, governmental filings, geological data, proprietary
                      seismic
                      data, non-proprietary seismic data where dissemination of such
                      data does
                      not violate the terms of any contracts, information and analysis,
                      production reports, production logs, cores sample reports and
                      maps as such
                      data is assembled in the normal course of
                      business.

                  

          

        

        
          
            	
                        (g)         
                      

                  	
                    A
                      like interest in and to all geologic and geophysical interpretations
                      related to the Properties including all maps and data of any
                      kind.

                  

          

        

        
          
            	
                        (h)         
                      

                  	
                    Notwithstanding
                      anything to the contrary contained herein, it is understood
                      that Seller,
                      its shareholders and/or affiliates may own fee surface in North
                      Dakota and
                      such fee surface ownership is excluded from the definition
                      of “Lands” and
                      not intended to be conveyed to
                      Buyer.

                  

          

        

        
          
            	
                        (i)          
                      

                  	
                    Notwithstanding
                      anything to the contrary contained herein, it is understood
                      that Seller,
                      its shareholders and/or affiliates may currently own royalty,
                      mineral and
                      overriding royalty interests in North Dakota and that it is
                      not the intent
                      to convey such interests to Buyers unless such interests are
                      required, on
                      any given Property, to make Seller’s net revenue interests equal to those
                      net revenue interests set forth on Exhibit
“A”.

                  

          

        

        

        
          
            
              
                
                  	    1.02       	
                          Excluded
                            Assets.
                            As used herein, “Excluded Assets” means (a) all trade credits and all
                            accounts, instruments and general intangibles attributable
                            to the
                            Properties with respect to any period of time prior to
                            the Effective Time;
                            (b) all claims and causes of action against Seller (i)
                            arising from acts,
                            omissions or events, or damage to or destruction of property,
                            occurring
                            prior to the Effective Time, (ii) arising under or with
                            respect to any
                            contracts that are attributable to periods of time prior
                            to the Effective
                            Time (including claims for adjustments or refunds), or
                            (iii) with respect
                            to any of the Excluded Assets; (c) all rights and Properties
                            of Seller (i)
                            under any policy or agreement of insurance or indemnity,
                            (ii) under any
                            bond, or (iii) to any omissions or events, or damage
                            to or destruction of
                            property, occurring prior to the Effective Time; (d)
                            all substances
                            produced and sold from the Wells and Leases with respect
                            to all periods
                            prior to the Effective Time, together with all proceeds
                            from or of such
                            substances; (e) claims of Seller for refunds of or loss
                            carry forwards to
                            respect to (i) production or any other taxes attributable
                            to any period
                            prior to the Effective Time, (ii) income or franchise
                            taxes, or (iii) any
                            taxes attributable to the Excluded Assets; (f) all amounts
                            due or payable
                            to Seller as adjustments to insurance premiums related
                            to the Properties
                            with respect to any periods prior to the Effective Time;
                            (g) all proceeds,
                            income or revenues (and any security or other deposits
                            made) attributable
                            to (i) the Properties for any period prior to the Effective
                            Time, or (ii)
                            any Excluded Assets; (h) all personal computers and associated
                            peripherals
                            and all radio and telephone equipment; (i) all of Seller’s proprietary
                            computer software, patents, trade secrets, copyrights,
                            names, trademarks,
                            logos and other intellectual property; (j) all documents
                            and instruments
                            of Seller that may be protected by an attorney-client
                            privilege; (k) data
                            that cannot be disclosed or assigned to Buyer as a result
                            of
                            confidentiality arrangements under agreements with persons
                            unaffiliated
                            with Seller; (l) all audit rights arising under any contracts
                            or otherwise
                            with respect to any period prior to the Effective Time
                            or to any of the
                            Excluded Assets; and (m) all (i) agreements and correspondence
                            between
                            Seller and its representatives and any affiliates thereof
                            relating to the
                            transactions contemplated in this Agreement, (ii) lists
                            of prospective
                            purchasers for transactions compiled by Seller or its
                            representatives,
                            (iii) bids submitted by other prospective purchasers
                            of the Properties,
                            (iv) analyses by Seller or its representatives of any
                            bids submitted by
                            any prospective purchaser, (v) correspondence between
                            or among Seller or
                            its representatives, or either of their respective representatives,
                            and
                            any prospective purchaser other than Buyer, and (vi)
                            correspondence
                            between Seller or its representatives, or any of their
                            respective
                            representatives with respect to any of the bids, the
                            prospective
                            purchasers, the engagement or activities of its representatives
                            or the
                            transactions contemplated in this
                            Agreement.

                        

                

              

            

          

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        
 

        
          	    1.03       
                  	
                  Effective
                    Time.
                    The purchase and sale of the Properties shall be effective for
                    all
                    purposes as January 1, 2007 at 7:00 a.m., local time at the location
                    of
                    the Properties (the “Effective
                    Time”).

                

        

         

        ARTICLE
          II

         

        PURCHASE
          PRICE

         

        
          	    2.01       
                  	
                  Purchase
                    Price.
                    The consideration paid by seller for the Properties shall consist
                    of (i)
                    Ten Million Dollars ($10,000,000.00) in U.S. funds to be paid
                    at closing,
                    (ii) Ten Million Dollars ($10,000,000.00) worth of Buyer’s common stock
                    (said stock will be subject to restrictions set forth pursuant
                    to the
                    Securities and Exchange Commission Rule 144); the number of shares
                    to be
                    issued shall be determined by dividing $10,000,000 by the average
                    closing
                    price of said stock for the five trading days immediately prior
                    to
                    closing, and (iii) Forty Five Million Dollars ($45,000,000.00)
                    in project
                    funding described in Article III below (the “Purchase Price”), which shall
                    be adjusted as set forth in Section 2.02
                    below.

                

        

        

        
          	    2.02       
                  	
                  Adjustments
                    to Purchase Price.
                    The Purchase Price shall be adjusted as follows and the resulting
                    amount
                    shall be referred to as the “Adjusted Purchase
                    Price”;

                

        

        

        
          	(a)      
                   	
                  The
                    Purchase Price shall be adjusted upward as
                    follows

                

        

        

        
          	(i)        
                       	
                  The
                    value of all oil and gas in storage or pipelines at the Effective
                    Time
                    above the pipeline connection or upstream of the sales meter
                    which is
                    credited to the Properties, such value to be the market value
                    or, if
                    applicable, the contract price in effect as of the Effective
                    Time, less
                    taxes and deductions by the
                    purchaser;

                

        

        
          	(ii)             	
                  An
                    amount equal to all prepaid expenses attributable to the Properties
                    that
                    are paid by Seller or any affiliate of Seller prior to the Closing
                    Date
                    (defined below) that inure to the benefit of Buyer and that are,
                    in
                    accordance with generally accepted accounting principles, attributable
                    to
                    the period after the Effective Time, including without limitation,
                    prepaid
                    ad valorem, property, production, severance and similar taxes
                    (but not
                    including some income taxes) based upon or measured by the ownership
                    of
                    property or the production of hydrocarbons or the receipt of
                    proceed there
                    from;

                

        

        
          
            
              	                     (iii)             
                      	
                      Any
                        other amount agreed upon by Seller and
                        Buyer.

                    

            

          

        

        

        
          	(b)     	
                  The
                    Purchase Price shall be adjusted downward by the
                    following:

                

        

        

        
          	(i)          
                    	
                  An
                    amount equal to Seller’s pro rata share of any unpaid ad valorem,
                    property, production, severance and similar taxes and assessments
                    (but not
                    including income taxes) based upon or measured by the ownership
                    of
                    property or the production of hydrocarbons or the receipt of
                    proceeds
                    therefrom accruing to the Properties prior to the Effective
                    Time;

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        
          	(ii)         
                    	
                  An
                    amount equal to the sum of all Title Defect and Environmental
                    Defect
                    adjustments as set forth in Articles 8.05 and 8.06
                    respectively;

                

        

        
          	(iii)        
                    	
                  Any
                    other amount agreed upon by Seller and
                    Buyer.

                

        

         

        
          	    2.03       	
                  Allocation
                    of Purchase Price.
                    Buyer and Seller mutually agree that the allocation of the Purchase
                    Price
                    to Properties is as set forth on Exhibit “B”
                    hereto.

                

        

         

        ARTICLE
          III

         

        DEVELOPMENT
          PROGRAM FUNDING

         

        
          
            	    3.01       
                    	
                    As
                      additional consideration, for a period not to exceed five (5)
                      years from
                      the Effective Time, Buyer agrees to provide $45,000,000 in
                      total funding
                      to cover 100% (proportionately reduced to the interest of Buyer
                      and Seller
                      in any given project) of the mutually agreed upon capital costs
                      associated
                      with creating secondary recovery units, drilling/converting
                      wells to
                      enhance secondary recovery operations encompassing the Properties;
                      and in
                      acquiring additional producing properties in North Dakota,
                      acquiring
                      undeveloped oil and gas leasehold and/or contractual rights
                      to oil and gas
                      leasehold, shooting/acquiring seismic data and drilling test
                      wells,
                      (“Other Projects”), collectively, (the “Development Program”).
                      

                  

          

        

         

        
          
            	    3.02       
                    	
                    It
                      is the expressed intent of both Buyer and Seller to use the
                      Development
                      Program funding to create maximum value. The parties agree
                      to initially
                      allocate $30,000,000 to developing the Properties and $15,000,000
                      to Other
                      Projects. These allocations may be changed from time to time
                      by mutual
                      agreement as results and opportunities may
                      dictate.

                  

          

        

        

        
          
            	    3.03       
                    	
                    All
                      Properties included in the Development Program shall be owned
                      50% by
                      Seller and 50% by Buyer. Any capital spent in excess of the
                      amounts
                      allocated for developing the Properties or in excess of the
                      amounts
                      allocated for Other Projects, as such allocations may exist
                      from time to
                      time, shall be borne 50% by Seller and 50% by
                      Buyer.

                  

          

        

        

        
          
            	    3.04       
                    	
                    Exhibit
                      “C” hereto is a “Business Plan” which shall include a general description
                      of projects to be undertaken, a timeline estimating when each
                      project will
                      be commenced, and a budget estimating the anticipated costs
                      of each
                      project. Regular meetings (at least quarterly) shall be held
                      to create and
                      approve the current Business Plan for each quarter and to adjust
                      the
                      allocation of Development Program capital as needed. Such meetings
                      shall
                      be held in the offices of Seller located in Kenmare, North
                      Dakota, or at
                      any other mutually acceptable location. The current Business
                      Plan, in
                      place at any given time, shall serve as authorization for Seller
                      to
                      perform the projects identified prior to the next regular meeting.
                      It is
                      not the intent of this agreement to require Seller to obtain
                      expenditure
                      approval for individual projects that are previously agreed
                      to and
                      included in the current Business Plan.

                  

          

        

        

        
          
            	    3.05       
                    	
                    If
                      Buyer elects not to fund any project which involves the Properties
                      and
                      which is set forth in the Business Plan as attached hereto
                      or included in
                      the current Business Plan as amended at a later date, then
                      the Buyer shall
                      reassign all of its right, title and interest in the applicable
                      Properties
                      to Seller unencumbered by any mortgages, liens or lease burdens
                      in excess
                      of those in place at Closing, and Seller shall refund the allocated
                      purchase price associated with the applicable Properties, plus
                      50% of any
                      capital expended, and allocate the future Development Program
                      capital
                      obligation for these Properties to the Other Projects account.
                      In the
                      event Buyer elects not to fund any project which involves the
                      Properties,
                      Seller shall have the option to rescind the associated proposed
                      project
                      and in such case(s) Seller shall have no obligation to purchase
                      the
                      interest of Buyer and the Parties will continue to own and
                      operate the
                      properties as they have in the past. All revenue less operating
                      expenses
                      received by Buyer on the applicable Properties prior to the
                      relinquishment
                      of interest shall be subtracted from the refund amount. Valuation
                      of the
                      stock consideration attributable to the relinquished property
                      shall be
                      calculated in a manner identical to that set forth in Article
                      8.05(f).
                      

                  

          

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        
          
            	    3.06       
                    	
                    As
                      it relates to capital expenditures on Other Projects, the parties
                      agree
                      that (i) if Buyer has participated in every project proposed
                      by Seller
                      during the aforementioned five (5) year term then all unspent
                      funds shall
                      be the sole property of Buyer; (ii) if Buyer has not participated
                      in every
                      project proposed by Seller, and there are funds allocated to
                      Other
                      Projects, this provision shall be extended by two years and
                      Seller shall
                      be obligated during that two year term to present a sufficient
                      number of
                      projects to spend at least three times the amount of the unspent
                      funds. If
                      at the end of the extended term there remain unspent funds,
                      said funds
                      shall be owned 50% by Seller and 50% by Buyer.

                  

          

           

        

        
          
            	
                        3.07       
                      

                  	
                    Either
                      Buyer or Seller may request that the ongoing Development Program
                      be halted
                      to evaluate performance. The ongoing Development Program will
                      be halted
                      pending the necessary evaluation by the parties and third party
                      experts
                      (to the extent necessary) to determine its viability and possible
                      remediation thereof. The parties will mutually agree on a course
                      of action
                      which may include, but is not limited to, remediation efforts,
                      alternative
                      water flood designs, additional drilling, deferral of capital
                      spending, or
                      redirection of capital into other
                      projects.

                  

          

        

        

        
          
            	    3.08       
                    	
                    Nothing
                      herein shall limit either Buyer or Seller from conveying portions
                      of their
                      interests in any or all of the Properties to third parties
                      or from
                      encumbering any of the Properties with mortgages or liens.
                      In the event
                      Buyer encumbers any of the Properties with mortgages or liens,
                      Buyer shall
                      have the holder of said mortgage execute a ratification of
                      this Agreement
                      which includes language which provides for the holder of said
                      mortgages or
                      liens to release said mortgages or liens as to any Properties
                      reassigned
                      pursuant to Article 3.05. 

                  

          

        

        

        
          
            	    3.09       
                    	
                    It
                      is agreed and understood that the $45,000,000 shall not be
                      used to pay
                      routine operating, repair, maintenance and overhead costs associated
                      with
                      the Properties. By way of example “routine operating, repair, maintenance
                      and overhead costs” shall include, but not be limited to, pumper’s
                      expense, overhead and administrative costs, utilities, road
                      and site
                      maintenance, and chemicals. Capital costs to be funded by the
                      aforementioned $45,000,000 shall include, but not be limited
                      to,
                      non-routine repairs to wells and changes in equipment in excess
                      of $10,000
                      that are required to advance the enhancement of oil recovery
                      (i.e.
                      replacing cavity pumps in source water wells, changing out
                      pumping units
                      to maximize efficiency,
                      etc.).

                  

          

        

        

        
          
            	    3.10       
                    	
                    During
                      the period between the execution of that certain “Binding Letter of
                      Intent” dated October 11, 2006 and the Closing date, all capital costs
                      associated with creating secondary recovery units encompassing
                      the
                      Properties, including, but not limited to the costs associated
                      with
                      drilling and/or converting wells to enhance secondary recovery
                      operations
                      relating to the Properties, shall be reimbursed to Seller from
                      the
                      $45,000,000 in funding provided by Buyer pursuant to this Article
                      III.
                      Seller shall not undertake any acts or incur any expenses which
                      it would
                      not otherwise take to develop the Properties in the absence
                      of this
                      agreement. Reimbursement shall be due Seller only if the transaction
                      contemplated herein closes, and shall be payable within 30
                      days of
                      submission by Seller to Buyer of documentation sufficient to
                      identify and
                      justify such costs as related to the development of the Properties.
                      In the
                      event that the transaction does not close due to failure of
                      any of the
                      conditions in Article 9.03 of this Agreement, Buyer shall have
                      no
                      obligation to reimburse Seller for any costs incurred by Seller
                      in
                      developing the Properties. During the period between the execution
                      of this
                      Agreement and the Closing date, Seller shall consult with Buyer
                      on any
                      expenditure in excess of
                      $100,000.

                  

          

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        
          
            	    3.11       
                    	
                    Seller
                      is currently involved in exploration and development activities
                      on
                      properties which are identified on Exhibit “D” hereto. Seller and Buyer
                      agree to establish an Area of Mutual Interest (“AMI”) consisting of the
                      State of North Dakota less and except the properties identified
                      on Exhibit
                      “D”. For a period of three years from the Effective Time hereof,
                      Seller
                      will offer Buyer the opportunity to include any Prospects identified
                      by
                      Seller within the AMI in the Development Program. Buyer shall
                      have no
                      obligation to include any given Prospect in the Development
                      Program.
                      Prospect shall be defined as any project involving the acquisition
                      of
                      seismic data, leasehold, farmins, mineral interests, producing
                      properties,
                      third party generated deals; and/or drilling of
                      wells.

                  

          

        

         

        ARTICLE
          IV

         

        OPERATIONS
          

        

        
          
            	    4.01       
                    	
                    All
                      operations on Properties which have not
                      been unitized as of the Effective Time shall be governed by
                      a joint
                      operating agreement identical in form to that attached hereto
                      as Exhibit
                      “E”.

                  

          

        

         

        
          
            	    4.02       
                    	
                    All
                      operations on Properties which have been unitized as of the
                      Effective Time
                      shall be governed by their respective applicable unit operating
                      agreement(s) as set forth in Exhibit “F” attached
                      hereto.

                  

          

        

        

        
          
            	    4.03       
                    	
                    Seller
                      represents that, for the twelve months prior to the execution
                      of this
                      Agreement, routine operating costs for the Properties have
                      averaged
                      $1,800/well/month. It is reasonable, going forward, for Buyer
                      to
                      experience operating costs at this level with increases consistent
                      with
                      standard industry inflation. For the purpose of this Agreement,
                      routine
                      operating costs shall be defined to mean producing well overhead,
                      insurance, pumper costs, utilities and
                      chemicals.

                  

          

        

         

        ARTICLE
          V

         

        PRODUCTION
          FLOOR

         

        
          
            	    5.01        
                    	
                    Seller
                      agrees that for a period of thirty-six months from the Effective
                      Time (as
                      defined in Article 1.04), Buyer shall be guaranteed by Seller
                      that Buyer’s
                      share of monthly production (net to Buyer’s interest) will be at least 300
                      barrels of oil multiplied by the number of days in a given
                      month
                      (“Production Floor”). In the event the gross production from the
                      Properties is not sufficient such that Buyer’s net share of production for
                      any month is not at least equal to the Production Floor, Seller
                      shall pay
                      to Buyer, in cash, an amount equal to the difference between
                      the
                      Production Floor and the actual net barrels to Buyer’s interest multiplied
                      by the average price of crude paid for the oil production from
                      the
                      Properties for that month (“Production Floor Payment”). The aggregate of
                      Production Floor Payments paid by Seller less Production Floor
                      Reimbursements (as defined later in this Section) paid by Buyer
                      shall be
                      defined as (“Production Floor Payment Balance”). The Production Floor
                      Payment Balance can be either zero ($0.00) or a positive dollar
                      amount.
                      

                  

          

        

         

        During
          this term and in the event Production Floor Payment balances exist, Seller
          shall
          be entitled to recover a portion of the Production Floor Payment balances
          from
          Buyer during any month in which Buyer’s net share of oil production exceeds the
          Production Floor. Buyer shall pay Seller, in cash, an amount equal to Buyer’s
          net barrels in excess of the Production Floor multiplied by the average
          price of
          crude paid for the oil production from the Properties for the month(s)
          in which
          Buyer’s net share of oil production exceeds the Production Floor (“Production
          Floor Reimbursement”). It is the intent hereof that if the value of the
          Production Floor Balance is, by way of example, $5,000, and Buyer’s Production
          Floor Reimbursement calculation is larger than $5,000, the Production Floor
          Reimbursement payment to Seller shall equal $5,000.

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	    5.02         
                  	
                  Reconciliation
                    shall occur on a monthly basis. 

                

        

         

        
          	    5.03         
                  	
                  At
                    the end of the thirty-six month term of this provision Buyer
                    shall be
                    obligated to settle any outstanding Production Floor Payment
                    balances in
                    cash. 

                

        

        

        
          	    5.04         
                  	
                  Exhibit
                    “H” is attached hereto to demonstrate the mechanics of this provision.
                    

                

        

         

        ARTICLE
          VI

         

        REPRESENTATIONS
          AND WARRANTIES

         

        
          	    6.01          
                  	
                  Representations
                    and Warranties of Seller.
                    Seller represents and warrants to Buyer as follows:
                    

                

        

        

        
          	(a)    
                   	
                  Seller
                    is a North Dakota corporation duly organized, validly existing
                    and in good
                    standing under the laws of its state of organization, and is
                    duly
                    qualified to conduct business in North
                    Dakota.

                

        

        
          	(b)   
                    	
                  Seller
                    has the requisite power and authority to carry on its business
                    as
                    presently conducted, to enter into this Agreement, to sell the
                    Properties
                    on the terms described in this Agreement and to perform its obligations
                    under this Agreement. The consummation of the transactions contemplated
                    by
                    this Agreement will not violate, nor be in conflict with, any
                    provision of
                    Seller’s governing documents, or any agreement or instrument to which
                    Seller is a party or is bound, or any judgment, decree, order,
                    statute,
                    rule or regulation applicable to
                    Seller.

                

        

        
          	(c)    
                   	
                  The
                    execution, delivery and performance of this Agreement and the
                    transactions
                    contemplated hereby have been duly and validly authorized by
                    all requisite
                    action on the part of Seller.

                

        

        
          	(d)   
                    	
                  This
                    Agreement has been duly executed and delivered on behalf of Seller,
                    and at
                    the Closing all documents and instruments required hereunder
                    to be
                    executed and delivered by Seller shall have been duly executed
                    and
                    delivered. This Agreement does, and such documents and instruments
                    shall,
                    constitute legal and valid obligations of
                    Seller.

                

        

        
          	(e)   
                    	
                  Seller
                    has incurred no liability, contingent or otherwise, for brokers’ or
                    finders’ fees relating to the transactions contemplated by this Agreement
                    for which Buyer shall have any responsibility
                    whatsoever.

                

        

        
          	(f)    
                   	
                  No
                    claim, demand, filing, hearing, notice of violation, proceeding,
                    notice or
                    demand letter, investigation, administrative proceeding, civil,
                    criminal
                    or other action, suit or other legal proceeding is pending or,
                    to the best
                    of Seller’s knowledge, threatened, against Seller relating to, resulting
                    from or affecting the ownership or operation of the Properties.
                    No notice
                    from any governmental authority or any other person (including
                    employees)
                    has been received by Seller as to any claim, demand, filing,
                    hearing,
                    notice of violation, proceeding, notice or demand letter, relating
                    to,
                    resulting from or affecting the ownership or operation of the
                    Properties,
                    claiming any violation of any law, statute, rule, regulation,
                    ordinance,
                    order, decision or decree of any governmental authority (including,
                    without limitation, any such law, rule, regulation, ordinance,
                    order,
                    decision or decree concerning the conservation of natural resources
                    or
                    claiming any breach of contract or agreement with any third
                    party.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	(g)   
                    	
                  To
                    the best of Seller’s knowledge, there are no wells located on the
                    Properties that (i) Seller is currently obligated by law or contract
                    to
                    presently plug and abandon; or (ii) have been plugged and abandoned
                    but
                    have not been plugged in accordance in all material respects
                    with all
                    applicable requirements of each regulatory authority having jurisdiction
                    over the Properties, including, but not limited to, the North
                    Dakota
                    Industrial Commission, Oil and Gas
                    Division.

                

        

        
          	(h)    
                   	
                  To
                    the best of Seller’s knowledge, Seller has paid its share of all costs
                    payable by it under the Leases. To the best of Seller’s knowledge, all
                    royalties, rentals, and other payments due under the Leases have
                    been
                    properly and timely paid. To the best of Seller’s knowledge, neither
                    Seller nor any other party is under default under any Lease,
                    and to the
                    best of Seller’s knowledge, all Leases associated with the properties
                    identified on Exhibit “A” are valid and subsisting oil and gas leases and
                    are currently in full force and
                    effect.

                

        

        
          	(i)     
                   	
                  To
                    the best of Seller’s knowledge, Seller is in compliance with all licenses,
                    permits, contracts and agreements relating to the Properties.
                    To the best
                    of Seller’s knowledge, Seller is in compliance with all laws, rules and
                    regulations of federal, state or local entities, which have jurisdiction
                    over Seller, or the Properties to be sold hereunder, including
                    but not
                    limited to all environmental regulations and laws. To the best
                    of its
                    knowledge, Seller has been and is in material compliance under
                    all
                    environmental laws.

                

        

        
          	(j)   
                    	
                  Seller
                    represents that there are no requisite third-party consents to
                    assign or
                    third-party waivers required in association with the
                    Properties.

                

        

        
          	(k)   
                    	
                  Seller
                    represents and warrants that Seller’s working and net revenue interests in
                    the Properties are as set forth on Exhibit “A” attached hereto and that
                    the Properties are not subject to any reversionary interests,
                    production
                    payments or other contractual arrangements which could result
                    in a change
                    of the interests set forth on Exhibit “A”. This warranty of title shall
                    remain in effect until such time as sufficient title work, such
                    as that
                    required for unitization of the Properties, is completed. In
                    the event the
                    working and net revenue interests in any of the Properties are
                    not as set
                    forth on Exhibit “A”, Buyer or Seller will be required to pay the other
                    party an amount equal to the amount determined using the guidelines
                    set
                    forth in Article VIII. In no event shall the warranty of title
                    provided
                    for herein remain in effect beyond January 1, 2010.
                    

                

        

        
          	(l)   
                    	
                  Seller
                    represents that, for the twelve months prior to the execution
                    of this
                    Agreement, routine operating costs for the Properties have averaged
                    $1,800/well/month. It is reasonable, going forward, for Buyer
                    to
                    experience operating costs at this level with increases consistent
                    with
                    standard industry inflation. For the purpose of this Agreement,
                    routine
                    operating costs shall be defined to mean producing well overhead,
                    insurance, pumper costs, utilities and
                    chemicals.

                

        

         

        
          	    6.02          
                  	
                  Representations
                    and Warranties of Buyer.
                    Buyer represents and warrants to Seller as
                    follows:

                

        

        

        
          	(a)     	
                  Buyer
                    is a Delaware corporation duly organized, validly existing and
                    in good
                    standing under the laws of its state of organization and is duly
                    qualified
                    to conduct business in the State of North
                    Dakota.

                

        

        
          	(b)  
                    	
                  Buyer
                    has all requisite power and authority to carry on its business
                    as
                    presently conducted, to enter into this Agreement, to purchase
                    the
                    Properties on the terms described in this Agreement and to perform
                    its
                    other obligations under this Agreement. The consummation of the
                    transactions contemplated by this Agreement will not violate,
                    nor be in
                    conflict with, any provision of Buyer’s governing documents, or any
                    agreement or instrument to which Buyer is a party or is bound,
                    or any
                    judgment, decree, order, statute, rule or regulation applicable
                    to Buyer.
                    

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	(c)  
                    	
                  The
                    execution, delivery and performance of this Agreement and the
                    transactions
                    contemplated hereby have been duly and validly authorized by
                    all requisite
                    action on the part of Buyer.

                

        

        
          	(d)  
                    	
                  This
                    Agreement has been duly executed and delivered on behalf of Buyer,
                    and at
                    the Closing all documents and instruments required hereunder
                    to be
                    executed and delivered by Buyer shall have been duly executed
                    and
                    delivered. This Agreement does, and such documents and instruments
                    shall,
                    constitute legal and valid obligations of Buyer.
                    

                

        

        
          	(e)  
                    	
                  Buyer
                    has incurred finders’ fees relating to the transactions contemplated by
                    this Agreement for which Seller shall have no responsibility
                    whatsoever.

                

        

        
          	(f)  
                    	
                  Buyer
                    is an experienced and knowledgeable investor in the oil and gas
                    business.
                    Buyer is acquiring the Properties for its own account and not
                    with a view
                    to, or for offer of resale in connection with, a distribution
                    thereof,
                    within the meaning of the Securities Act of 1933, 15 U.S.C. *77a
                    et seq.,
                    and any other rules regulations and laws pertaining to the distribution
                    of
                    securities.

                

        

        
          	(g)     	
                  Buyer
                    shall have arranged by the Closing Date to have available sufficient
                    funds
                    to enable the payment to Seller by wire transfer the Adjusted
                    Purchase
                    Price in accordance with Article 2 hereof and to otherwise perform
                    Buyer’s
                    obligations under this Agreement.

                

        

         

        ARTICLE
          VII

         

        COVENANTS

         

        
          	    7.01          
                  	
                  Covenants
                    of Seller.
                    Seller covenants and agrees with Buyer that from the effective
                    date hereof
                    to the Closing Date, except (i) as provided herein, (ii) as required
                    by
                    any obligation, agreement, lease, contract or instrument affecting
                    the
                    Properties, or (iii) as otherwise consented to in writing by
                    Buyer, Seller
                    shall:

                

        

         

        
          	(a)  
                    	
                  Give
                    Buyer and its representatives access to and the right to copy,
                    at Buyer’s
                    expense, all nonproprietary information in its possession relating
                    to the
                    Properties which shall include, without limitation, title opinions,
                    abstracts of title, land records, accounting records, production
                    records,
                    operating expense records, engineering, geological and geophysical
                    data,
                    development plans and permits, and any other information of whatsoever
                    kind relating to the production and operation of the Properties.
                    All such
                    information shall be open to inspection and photocopying at Seller’s
                    offices at any reasonable time during the term of this Agreement,
                    but
                    until subsequent to the Closing shall remain confidential and
                    shall not be
                    disclosed to any third party other than Buyer’s employees and agents.
                    Buyer’s right to copy and have access to the information set forth
                    above
                    shall remain for as long as Buyer owns an interest in the
                    Properties.

                

        

        
          	(b)  
                    	
                  Until
                    the Closing Date, Seller (i) will operate its business in the
                    ordinary
                    course, (ii) will not, without prior written consent of Buyer,
                    which
                    consent shall not be unreasonably withheld, commit to any operation,
                    or
                    services of related operations, reasonably anticipated by Seller
                    to
                    require future capital expenditures by Seller in excess of One
                    Hundred
                    Thousand Dollars ($100,000), or to terminate, materially amend,
                    execute or
                    extend any material agreements affecting the Properties, (iii)
                    will
                    maintain general insurance coverage on the Properties presently
                    furnished
                    by nonaffiliated third parties in the amounts of the types presently
                    in
                    force, (iv) will use commercially reasonable efforts to maintain
                    in full
                    force and effect all Leases, (v) will maintain all material governmental
                    permits and approvals affecting the Properties, (vi) will not
                    transfer,
                    farmout, sell, hypothecate, encumber or otherwise dispose of
                    any material
                    interest except for sales and dispositions of oil and gas production
                    and
                    equipment made in the ordinary course of business consistent
                    with past
                    practices, (vii) will not enter into, assign, terminate or amend,
                    in any
                    material respect, any contract or other agreement by which the
                    Properties
                    are bound, and (viii) will not commit to do any of the
                    foregoing.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	(c)  
                   	
                  Take
                    or cause to be taken all such actions as may be necessary or
                    advisable to
                    consummate and make effective the sale of the Properties and
                    the
                    transactions contemplated by this Agreement and to assure that
                    as of the
                    Closing Date it will not be under any material organization,
                    legal or
                    contractual restriction that would prohibit or delay the timely
                    consummation of such transactions.

                

        

        
          	(d)    	
                  Cause
                    all the representations and warranties of Seller contained in
                    this
                    Agreement to be true and correct on and as of the Closing
                    Date.

                

        

        
          	(e)    	
                  Notify
                    Buyer (i) if any representation or warranty of Seller contained
                    in this
                    Agreement is discovered to be or becomes untrue, or (ii) if Seller
                    fails
                    to perform or comply with any covenant or agreement contained
                    in this
                    Agreement or it is reasonably anticipated that Seller will be
                    unable to
                    perform or comply with any covenant or agreement contained in
                    this
                    Agreement. 

                

        

         

        
          	    7.02          
                    	
                  Covenants
                    of Buyer.
                    Buyer covenants and agrees with Seller that from the effective
                    date hereof
                    to the Closing Date, except (i) as provided herein , or (ii)
                    as otherwise
                    consented to in writing by Seller, Buyer
                    shall:

                

        

        

        
          	(a)   
                   	
                  Take
                    or cause to be taken all such action as may be necessary or advisable
                    to
                    consummate and make effective the purchase of the Properties
                    and the
                    transactions contemplated by this Agreement and to assure that
                    as of the
                    Closing Date it will not be under any material organizational,
                    legal or
                    contractual restriction that would prohibit or delay the timely
                    consummation of such transactions.

                

        

        
          	(b)   
                   	
                  Cause
                    all the representations and warranties of Buyer contained in
                    this
                    Agreement to be true and correct on and as of the Closing
                    Date.

                

        

        
          	(c)  
                    	
                  Promptly
                    notify Seller (i) if any representation or warranty of Buyer
                    contained in
                    this Agreement is discovered to be or become untrue, or (ii)
                    if Buyer
                    fails to perform or comply with any covenant or agreement contained
                    in
                    this Agreement or it is reasonably anticipated that Buyer will
                    be unable
                    to perform or comply with any covenant or agreement contained
                    in this
                    Agreement.

                

        

         

        ARTICLE
          VIII

         

        TITLE
          MATTERS, ENVIRONMENTAL MATTERS,

        CASUALTY
          LOSS AND ABANDONMENT

        
           

        

        
          	    8.01          
                  	
                  Seller’s
                    Title.
                    Seller represents to Buyer that Seller’s title to the Properties as of the
                    Effective Time is (and as of the Closing shall be) “Marketable Title” as
                    defined in Section 8.02 herein
                    below.

                

        

        

        
          	    8.02          
                  	
                  Definition
                    of Marketable Title.
                    As
                    used in this Agreement, the term “Marketable Title” shall mean, as to each
                    of the Properties, that the title acquired by
                    Buyer:

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        
          	(a)  
                    	
                  Will
                    entitle Buyer to receive not less than the Net Revenue Interests
                    set forth
                    in Exhibit “A” to this Agreement and a like share of all hydrocarbons
                    produced, saved and marketed from the Properties throughout the
                    productive
                    life thereof except for any reduction, suspension on termination
                    caused by
                    Permitted Encumbrances.

                

        

        
          	(b)  
                    	
                  Will
                    obligate Buyer to bear not more than that percentage of the costs
                    and
                    expenses related to the maintenance and development of and operations
                    of
                    the Working Interests as set forth on Exhibit “A” and a like share
                    attributable thereto through the productive life thereof except
                    for any
                    increase caused by Permitted
                    Encumbrances.

                

        

        
          	(c)  
                    	
                  Is
                    free and clear of all liens, security interests, encumbrances,
                    burdens and
                    claims of any kind, by through or under Seller, but not otherwise,
                    except
                    for Permitted Encumbrances.

                

        

         

        
          	    8.03          
                  	
                  Definition
                    of Permitted Encumbrances. As
                    used herein, the term “Permitted Encumbrances” shall
                    mean:

                

        

        

        
          	(a) 
                    	
                  Lessor’s
                    royalties, overriding royalties, reversionary interests and similar
                    burdens, whether recorded or unrecorded, that do not operate
                    to reduce the
                    Net Revenue Interests set forth in Exhibit
“A”.

                

        

        
          	(b) 
                    	
                  Division
                    orders and sales contracts terminable without penalty upon no
                    more than
                    thirty (30) days’ notice to the
                    purchaser.

                

        

        
          	(c) 
                    	
                  Encumbrances
                    relating to the Properties that arise under operating agreements
                    to secure
                    payment of amounts not yet delinquent and are of a type and nature
                    customary in the oil and gas
                    industry.

                

        

        
          	(d) 
                    	
                  Encumbrances
                    relating to the Properties securing payments to mechanics and
                    materialmen
                    and encumbrances securing payment of taxes or assessments that
                    are, in
                    either case, not yet delinquent or, if delinquent, are being
                    contested in
                    good faith in the normal course of
                    business.

                

        

        
          	(e) 
                    	
                  All
                    rights to consent by, required notices to, filings with, or other
                    actions
                    by governmental entities in connection with the sale or conveyance
                    of oil
                    and gas leases or Properties therein if they are customarily
                    obtained
                    subsequent to the sale or
                    conveyance.

                

        

        
          	(f) 
                    	
                  Conventional
                    rights of reassignment obligating Seller to reassign its interest
                    in any
                    portion of the Properties to a third party in the event it intends
                    to
                    release or abandon such Properties prior to the expiration of
                    the primary
                    term or other termination of such
                    Properties.

                

        

        
          	(g) 
                    	
                  Easements,
                    rights of way, servitudes, permits, surface leases, surface use
                    restrictions and other surface uses and impediments on, over
                    or in respect
                    to any of the Properties that do not, taken as a whole, materially
                    interfere with the operation, value or use of the
                    Properties.

                

        

        
          	(h) 
                    	
                  All
                    rights reserved to or vested in any governmental, statutory or
                    public
                    authority to control or regulate any of the Properties in any
                    manner, and
                    all applicable laws, rules and orders of governmental
                    authority.

                

        

        
          	(i) 
                    	
                  Such
                    Title Defects of which Buyer shall fail to deliver notice to
                    Seller in
                    writing as provided in Article 8.05(b)
                    below.

                

        

         

        
          	    8.04          
                  	
                  Definition
                    of Title Defect.
                    As
                    used in this Agreement the term “Title Defect” shall mean any defect which
                    renders title to a Property less than Marketable
                    Title.

                

        

         

        
          	    8.05          
                  	
                  Title
                    Procedure.

                

        

         

        
          	(a)  
                    	
                  As
                    used herein, “Title Defect Amount” means, with respect to any reduction or
                    increase of the Net Revenue Interest set forth on Exhibit “A” hereto, an
                    amount calculated by multiplying the reduction or increase in
                    the Net
                    Revenue Interest by the Allocated Value for the affected Property.
                    

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	(b)  
                    	
                  If
                    Buyer discovers any Title Defect, Buyer shall give Seller notice
                    of such
                    Title Defect as soon as reasonably practicable after said defect
                    is
                    discovered but in no event later than three (3) days prior to
                    the Closing
                    Date. Such notice shall be in writing and shall include (i) a
                    description
                    of the Title Defect and (ii) the Title Defect Amount therefore.
                    Buyer
                    shall be deemed to have waived all Title Defects of which Buyer
                    has not
                    given timely notice to Seller
                    thereof.

                

        

        
          	(c)  
                    	
                  Seller
                    shall notify Buyer in writing not later than one (1) day prior
                    to the
                    Closing Date whether Seller elects to cure the alleged Title
                    Defect. If
                    Seller has elected to cure the Title Defect, then the Property
                    subject to
                    the Title Defect shall not be assigned at the Closing and Seller
                    shall use
                    commercially reasonable efforts to cure such Title Defect during
                    a period
                    ending sixty (60) days after Closing. Notwithstanding the foregoing,
                    Seller shall be under no obligation to cure any Title Defect
                    unless Seller
                    otherwise expressly agrees in writing to cure such Title
                    Defect.

                

        

        
          	(d)  
                    	
                  With
                    respect to any Title Defect that Seller elects not to cure, Seller
                    and
                    Buyer shall mutually agree to transfer the Property subject to
                    such Title
                    Defect to Buyer and the Purchase Price shall be reduced by the
                    Title
                    Defect Amount. If the aggregate of all adjustments to the Purchase
                    Price
                    for Title Defects is less that five percent (5%), then no adjustment
                    shall
                    apply.

                

        

        
          	(e)  
                    	
                  Seller
                    and Buyer acknowledge that, due to the age of the Properties
                    and the
                    complexity of title, it may not be possible for Buyer to review
                    title to
                    all of the Properties prior to closing. Buyer shall use its best
                    efforts
                    to complete all title work in a timely manner; however, as to
                    any and all
                    Properties on which Buyer has not approved title prior to Closing,
                    the
                    warranty of title provided for in Article 6.01(k) shall survive
                    the
                    Closing and remain in full force and
                    effect.

                

        

        
          	(f)  
                    	
                  Partial
                    consideration for this transaction consists of the common stock
                    of the
                    Buyer and Development Program Funding. With respect to calculating
                    the
                    Title Defect Value prior to closing, both the amount of stock
                    tendered and
                    the amount of Development Program Funding shall be reduced
                    proportionately. In calculating the Title Defect Value after
                    closing, the
                    amount of Development Program Funding shall be reduced proportionately
                    and
                    a cash amount equal to the appropriate number of shares of stock,
                    valued
                    as set forth in Article 2.01, shall be paid to reconcile the
                    Title Defect
                    Amount.

                

        

         

        
          	    8.06          
                  	
                  Environmental
                    Procedure.

                

        

        

        
          	(a) 
                    	
                  Prior
                    to the Closing Date, Buyer may conduct a field inspection of
                    the
                    Properties and Buyer may further secure, at its sole risk, cost
                    and
                    expense, an environmental audit of all or any of the Properties.
                    At
                    Buyer’s request, Seller will make arrangements with the operator of
                    the
                    Properties for Buyer, or Buyer’s representatives, to conduct the
                    inspection or audit. If obtained, Buyers shall immediately furnish
                    a copy
                    of such environmental audit to Seller and the contents of such
                    environmental audit shall remain confidential unless required
                    to be
                    disclosed by any rule, order or governmental
                    proceeding.

                

        

        
          	(b) 
                    	
                  As
                    used herein, Environmental Defect shall mean any material environmental
                    defect relating to the Properties in the nature of environmental
                    pollution
                    or contamination, including pollution of the soil, ground water
                    or the
                    air; underground injection activities and waste disposal on site
                    or
                    offsite; failure to comply with applicable land use, surface
                    disturbance,
                    licensing or notification requirements; or violations of environmental
                    or
                    land use rules, regulations, demands or orders of appropriate
                    state or
                    federal regulatory agencies.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	(c) 
                    	
                  As
                    used herein, Environmental Defect Amount means the cost to remediate
                    such
                    Environmental Defect in accordance with applicable environmental
                    laws.
                    Notwithstanding the foregoing, if the aggregate of all adjustments
                    to the
                    Purchase Price for Environmental Defects is less that five percent
                    (5%),
                    then no adjustment shall apply. However, if the aggregate of
                    all
                    adjustments to the Purchase Price for Environmental Defects exceeds
                    five
                    percent (5%), then the entire amount of the Environmental Defects
                    shall
                    apply without the five percent (5%)
                    deductible.

                

        

        
          	(d) 
                    	
                  If
                    Buyer discovers any Environmental Defect, Buyer shall give Seller
                    notice
                    of such Environmental Defect as soon as reasonably practicable
                    after said
                    defect is discovered but in no event later than three (3) days
                    prior to
                    the Closing Date. Such notice shall be in writing and shall include
                    (i) a
                    description of the Environmental Defect and (ii) the Environmental
                    Defect
                    Amount therefore. Buyer shall be deemed to have waived all Environmental
                    Defects of which Buyer has not given timely notice to Seller
                    thereof.

                

        

        
          	(e) 
                    	
                  Seller
                    shall notify Buyer in writing not later than one (1) day prior
                    to the
                    Closing Date whether Seller elects to cure the alleged Environmental
                    Defect. If Seller has elected to cure the Environmental Defect,
                    then the
                    Properties subject to the Environmental Defect shall not be assigned
                    at
                    the Closing and Seller shall use commercially reasonable efforts
                    to cure
                    such Environmental Defect during a period ending one hundred
                    eighty (180)
                    days after Closing. Notwithstanding the foregoing, Seller shall
                    be under
                    no obligation to cure any Environmental Defect unless Seller
                    otherwise
                    expressly aggress in writing to cure such Environmental
                    Defect.

                

        

        
          	(f) 
                    	
                  With
                    respect to any Environmental Defect that Seller elects not to
                    cure, Seller
                    and Buyer shall mutually agree to either (i) exclude the Properties,
                    including pipelines and other personal property necessary to
                    operate the
                    particular Properties subject to the Environmental Defect, in
                    which event
                    the Purchase Price shall be reduced by the Environmental Defect
                    Amount; or
                    (ii) transfer the Properties subject to the Environmental Defect
                    to Buyer
                    and the Purchase Price shall be reduced by the Environmental
                    Defect
                    Amount.

                

        

        
          	 	
                  (g)  
                    

                	
                  Notwithstanding
                    any terms contained in this Agreement to the contrary, in the
                    event the
                    aggregate amount of the Environmental Defects and the Title Defects
                    set
                    forth in Section 8.05 hereinabove which Seller does not timely
                    agree to
                    cure exceeds twenty percent (20%) of the Purchase Price, either
                    Seller or
                    Buyer may elect to terminate this
                    Agreement.

                

        

         

        
          	    8.07          
                  	
                  Casualty
                    Loss.
                    If, subsequent to the effective date of this Agreement but prior
                    to the
                    Closing Date, all or any portion of the Properties shall be destroyed
                    by
                    fire or other casualty, or if any portion of the Properties shall
                    be taken
                    in condemnation or under the right of eminent domain or if proceedings
                    for
                    such purpose shall be pending or threatened, this Agreement shall
                    remain
                    in full force and effect notwithstanding any such destruction
                    or taking,
                    and Seller shall at Closing pay to Buyer 50% of the sums paid
                    to Seller by
                    reason of such destruction or taking, In addition, Seller shall
                    assign,
                    transfer and set over unto Buyer 50% of the right, title and
                    interest of
                    Seller in and to any unpaid awards or other payments arising
                    out of such
                    destruction or taking. Seller shall not voluntarily compromise,
                    settle or
                    adjust any amounts payable by reason of such destruction or taking
                    without
                    first obtaining the written consent of
                    Buyer.

                

        

        

        
          	    8.08          
                  	
                  Plugging
                    and Abandonment.
                    Upon Closing, Buyer shall assume Buyer’s proportionate share of Seller’s
                    plugging, replugging, abandonment, removal, disposal and restoration
                    obligations associated with the Properties acquired hereunder.
                    Such
                    obligations being assumed shall include, but not be limited to,
                    all
                    necessary and proper plugging and abandonment and/or removal
                    and disposal
                    of all the Wells, whether pre-existing or drilled by Seller,
                    and all
                    structures, personal property and equipment located on or associated
                    with
                    the Leases listed on Exhibit “A”, the necessary and proper capping and
                    burying of all associated flow lines, and any necessary disposal
                    of
                    naturally occurring radioactive material (NORM) or asbestos.
                    All plugging,
                    replugging, abandonment, removal, disposal and restoration operations
                    shall be in compliance with applicable laws and regulations and
                    conducted
                    in a good and workmanlike manner.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        
          	    8.09          
                  	
                  Disclaimer
                    of Warranties.
                    THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED
                    IN THIS
                    AGREEMENT (OR IN THE ASSIGMENT TO BE EXECTUTED PURSUANT TO THIS
                    AGREEMENT)
                    ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND
                    WARRANTIES,
                    EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND SELLER EXPRESSLY
                    DISCLAIMS
                    ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES. SUBJECT
                    TO THE
                    FOREGOING, THE PROPERTIES SHALL BE CONVEYED PURSUANT HERETO WITHOUT
                    ANY
                    WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY,
                    OR
                    OTHERWISE RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS
                    FOR A
                    PARTICUAL PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS,
                    OR
                    MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE,
                    AND
                    WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY, OR OTHER WARRANTY
                    OR
                    REPRESENTATIONS WHATSOEVER. BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE
                    HEREIN, ACCEPT ALL OF THE SAME “AS IS, WHERE IS”. WITHOUT LIMITATION OF
                    THE FOREGOING, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS,
                    IMPLIED, STATUTORY, OR OTHEWISE, AS TO THE ACCURACY OR COMPLETENESS
                    OF ANY
                    DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR MATERIALS
                    NOW
                    HERETOFORE, OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER
                    IN
                    CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
                    PRICING
                    ASSUMPTIONS OF QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF
                    ANY)
                    ATTRIBUTABLE TO THE PROPERTIES, THE ABILITY OR POTENTIAL OF THE
                    PROPERTIES
                    TO PRODUCE HYDROCARBONS, OR THE ENVIRONMENTAL CONDITION OF THE
                    PROPERTIES
                    OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER BY
                    SELLER, OR
                    BY SELLER’S AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS,
                    REPORTS, PROJECTIONS, INFORMATION, AND OTHER MATERIALS (WRITTEN
                    OR ORAL)
                    FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE OR DISCLOSED
                    TO BUYER ARE
                    PROVIDED AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO
                    ANY
                    LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ON OR USE OF
                    THE SAME
                    SHALL BE AT BUYER’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
                    NOTWITHSTANDING THE FORGOING, THE WARRANTY OF TITLE PROVIDED
                    FOR IN
                    ARTICLE 6.01(K) IS EXPRESSLY EXCLUDED FROM THIS ARTICLE 8.09
                    AND SHALL
                    REMAIN IN FULL FORCE AND EFFECT.

                

        

        

        ARTICLE
          IX

         

        CONDITIONS
          TO CLOSING

         

        
          	    9.01          
                  	
                  Conditions
                    to Obligations of Seller.
                    The obligations of Seller to consummate the transactions contemplated
                    by
                    this Agreement are subject to the satisfaction, or waiver by
                    Seller, of
                    the condition that all representations and warranties of Buyer
                    contained
                    in this Agreement shall be true in all material respects at and
                    as of the
                    Closing as if such representations and warranties were made at
                    and as of
                    the Closing, and Buyer shall have performed and satisfied all
                    covenants
                    and agreements required by this Agreement to be performed and
                    satisfied by
                    Buyer at or prior to the Closing.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	    9.02          
                  	
                  Conditions
                    to Obligations of Buyer.
                    The obligations of Buyer to consummate the transactions contemplated
                    by
                    this Agreement are subject to the satisfaction, or waiver by
                    Buyer, of the
                    condition that all representations and warranties of Seller contained
                    in
                    this Agreement shall be true in all material respects at and
                    as of the
                    Closing as if such representations and warranties were made at
                    and as of
                    the Closing, and Seller shall have performed and satisfied all
                    covenants
                    and agreements required by this Agreement to be performed and
                    satisfied by
                    Seller at or prior to the Closing.

                

        

        

        
          	    9.03          
                  	
                  General
                    Conditions of Closing.
                    Without mutual agreement of the parties, closing shall not occur
                    and the
                    parties shall have no further obligation to one and other if
                    all of the
                    following do not occur:

                

        

         

        
          	(a)   
                   	
                  Buyer’s
                    independent engineer’s confirmation of the reserves, production numbers,
                    and operating expenses provided by
                    Seller.

                

        

        
          	(b)   
                   	
                  Buyer
                    successfully secures at least $60,000,000 in financing prior
                    to
                    Closing.

                

        

        
          	(c)   
                   	
                  Buyer
                    has provided Seller with evidence, acceptable to Seller, that
                    Buyer has
                    secured at least $60,000,000 in financing prior to
                    Closing.

                

        

        
          	(d)   
                   	
                  Approval
                    of the transaction contemplated by this Agreement by Buyer’s board of
                    directors.

                

        

        
          	(e)   
                   	
                  Approval
                    of the transaction contemplated by this Agreement by Seller’s board of
                    directors.

                

        

        

        Each
          party for whose benefit each of the conditions enumerated above has been
          imposed
          shall provide the other party written notice that the specific condition
          has
          been met, has failed, or has been waived; such condition shall be deemed
          to have
          been waived by the party for whose benefit the condition was imposed. In
          the
          event that any of the conditions set forth above fail, the Agreement of
          the
          parties shall terminate, and neither party shall have any further obligation
          to
          the other under the terms of this Agreement.

         

        ARTICLE
          X

         

        CLOSING

         

        
          	    10.01        
                    	
                  Date
                    of Closing.
                    Subject to the conditions stated in this Agreement, the consummation
                    of
                    the transactions contemplated by this Agreement (the “Closing”) shall be
                    held on or before December 31, 2006. Said date shall be referred
                    to as the
                    “Closing Date”.

                

        

        

        
          	    10.02        	
                  Place
                    of Closing.
                    The Closing shall be held at the offices of Seller, or at such
                    other place
                    as Buyer and Seller may agree upon in
                    writing.

                

        

        

        
          	    10.03        	
                  Closing
                    Obligations.
                    At
                    the Closing the following events shall occur, each being a condition
                    precedent to the others and each being deemed to have occurred
                    simultaneously with the others:

                

        

        

        
          	 	
                  (a)

                	
                  Seller
                    shall execute, acknowledge and deliver (in sufficient counterparts
                    to
                    facilitate recording) the Assignment, Conveyance and Bill of
                    Sale
                    (“Assignment”) conveying the Properties to Buyer in substantially the form
                    attached as Exhibit “I” hereto. As appropriate, Seller shall also execute,
                    acknowledge and deliver separate assignments of the Properties
                    on
                    officially approved forms, in sufficient counterparts, to satisfy
                    applicable statutory and regulatory requirements.
                    

                

        

        
          	 	
                  (b)

                	
                  Seller
                    and Buyer shall execute a settlement statement (the “Preliminary
                    Settlement Statement”) prepared by Seller that shall set forth the
                    Preliminary Amount (as hereinafter defined) and each adjustment
                    and the
                    calculations of such adjustments used to determine such amount.
                    The term
                    “Preliminary Amount” shall mean the Purchase Price adjusted as provided in
                    Article II using for such adjustments the best information then
                    available.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (c)

                	
                  Buyer
                    shall deliver to Seller a cashier’s check or wire transfer for the
                    Preliminary Amount.

                

        

        
          	 	
                  (d)
                    

                	
                  Buyer
                    shall deliver to Seller the number of shares of Buyers common
                    stock
                    provided for in Article 2.01
                    herein.

                

        

        
          	 	
                  (e)

                	
                  Seller
                    and Buyer shall execute, acknowledge and deliver transfer orders
                    or
                    letters in lieu thereof directing all purchasers of production
                    to make
                    payment of proceeds attributable to production from the Properties
                    after
                    the Effective Time to Buyer. 

                

        

         

        ARTICLE
          XI

         

        POSTS-CLOSING
          OBLIGATIONS 

         

        
          	    11.01        
                  	
                  Post-Closing
                    Adjustments.
                    After the Closing, Seller shall make available to Buyer all accounting
                    records necessary for Seller to prepare, in accordance with this
                    Agreement, a statement (the “Final Settlement Statement”) setting forth
                    each adjustment or payment which was not finally determined as
                    of the
                    Closing and showing the calculation of such adjustments. As soon
                    as
                    practicable after receipt of the Final Settlement Statement,
                    Buyer shall
                    deliver to Seller a written report containing any changes which
                    Buyer
                    proposes be made to the Final Settlement Statement. The parties
                    shall
                    undertake to agree with respect to the amounts due pursuant to
                    such
                    post-closing adjustment not later than ninety (90) days after
                    the Closing.
                    If such post-closing adjustment has not been agreed to within
                    ninety (90)
                    days after the Closing, either party may seek to enforce any
                    rights it
                    claims hereunder. The date upon which such agreement is reached
                    or upon
                    which the Adjusted Purchase Price is established, shall be referred
                    to as
                    the “Final Settlement Date.” In the event that (i) the Adjusted Purchase
                    Price is more than the Preliminary Amount, Buyer shall deliver
                    to Seller
                    or to Seller’s account the amount of such difference in immediately
                    available funds, or (ii) the Adjusted Purchase Price is less
                    than the
                    Preliminary Account, Seller shall deliver to Buyer or to Buyer’s account
                    the amount of such difference in immediately available funds.
                    Payment by
                    Buyer or Seller shall be made within five (5) days of the Final
                    Settlement
                    Date. To the extent not accounted for in the computation of the
                    Adjusted
                    Purchase Price, all uncollected accounts receivable attributable
                    to the
                    Properties on or after the Effective Time shall be assigned to
                    Buyer.
                    

                

        

        

        
          	    11.02        
                  	
                  Sales
                    Taxes and Recording Fees.
                    Buyer shall pay all sales taxes occasioned by the sale of the
                    Properties.
                    Seller will determine, with Buyer’s assistance, what sales tax, if any, is
                    due in connection with the sale of the Properties. Buyer shall
                    pay all
                    documentary, filing and recording fees required in connection
                    with the
                    filing and recording of all
                    assignments.

                

        

        

        
          	    11.03        
                  	
                  Further
                    Assurances.
                    Seller and Buyer shall execute, acknowledge and deliver or cause
                    to be
                    executed, acknowledged and delivered those instruments and take
                    such other
                    actions as may be necessary or advisable necessary to carry out
                    their
                    respective obligations under this Agreement and under any exhibit,
                    document, certificate or other instrument delivered pursuant
                    hereto.

                

        

        

        
          	    11.04        
                  	
                  Survival.
                    The representations, warranties, covenants, agreements and indemnities
                    contained in this Agreement shall survive Closing without
                    limitation.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        ARTICLE
          XII

         

        TERMINATION
          OF AGREEMENT

         

        
          	    12.01        	
                  Termination.
                    This Agreement and the transactions contemplated hereby may be
                    terminated
                    in the following instances:

                

        

        

        
          	 	
                  (a)

                	
                  By
                    Buyer if any condition set forth in Article 9.03 above shall
                    not be
                    satisfied on or before the Closing.

                

        

        
          	 	
                  (b)

                	
                  By
                    Seller if any condition set forth in Article 9.03 above shall
                    not be
                    satisfied on or before the Closing.

                

        

        
          	 	
                  (c)

                	
                  By
                    the mutual written agreement of Buyer and
                    Seller.

                

        

         

        
          	    12.02        
                  	
                  Return
                    of Information.
                    If
                    this Agreement is terminated, Buyer shall return to Seller all
                    information
                    and material delivered to Buyer by Seller pursuant to the terms
                    of this
                    Agreement.

                

        

        

        
          	    12.03        
                  	
                  Liabilities
                    upon Termination.
                    If
                    this Agreement is terminated for any reason or is breached, nothing
                    contained herein shall be construed to limit Seller’s or Buyer’s legal or
                    equitable remedies including, without limitation, damages for
                    the breach
                    or failure of any representation, warranty, covenant or agreement
                    contained herein and the right to enforce specific performance
                    of this
                    Agreement.

                

        

         

        ARTICLE
          XIII

        

        MISCELLANEOUS

        
           

        

        
          
            
              	    13.01        
                      	
                      Like
                        Kind Exchange.
                        The parties shall each have the option to complete all or
                        a portion of the
                        sale and purchase of the Properties as part of a tax-deferred
                        exchange
                        under Section 1031 of the Internal Revenue Code of 1986,
                        as amended. The
                        parties agree to cooperate in documenting and completing
                        such exchange,
                        including, without limitation, consenting to an assignment
                        of all or a
                        portion of a party’s rights, title, interest, duties, or obligation under
                        this Agreement to a third party accommodator or Qualified
                        Intermediary (as
                        such term is defined in Section 1031). Notwithstanding the
                        foregoing,
                        Buyer shall take title to the Properties directly from Seller
                        pursuant to
                        the Assignment and shall pay to Seller the Purchase Price
                        therefore, and
                        each party shall remain liable for its obligations to the
                        other party
                        hereunder.

                    

            

          

        

        

        
          
            
              	    13.02        
                      	
                      Expenses.
                        Except as otherwise specifically provided in this Agreement,
                        all fees,
                        costs and expenses incurred by Buyer or Seller in negotiating
                        this
                        Agreement or in consummating the transactions contemplated
                        by this
                        Agreement shall be paid by the party incurring the same,
                        including,
                        without limitation, legal and accounting fees, costs and
                        expenses.

                    

            

          

        

         

        
          	    13.03        
                  	
                  Notices.
                    All notices and communications required or permitted under this
                    Agreement
                    shall be in writing and shall be effective when received by mail,
                    facsimile or hand delivery as
                    follows:

                

        

         

            If
          to
          Seller:    Robert
          Mau

                                                  
          President

                                                  
          Eagle
          Operating Inc.

                                                  
          P.O.
          Box
          853

                                                   11
          West
          Division Street, Suite 201

                                                  
          Kenmare,
          North Dakota 58746

                                                  
          Facsimile:
          (701) 385-4246

        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

                    
          If to Buyer:          Wayne
          P.
          Hall

                                                                                  
          Chairman
          and Chief Executive Officer

                                                                                  
          Petro
          Resources Corporation

                                                                                  
          5100
          Westheimer, Suite 200

                                                                                  
          Houston,
          Texas 77056

                                                                                  
          Facsimile:
          (713) 968-9283

        

                 Either
          party may, by written notice so delivered to the other, change the address
          to
          which notice shall thereafter be made.

         

        
          
            
              	    13.04        
                      	
                      Amendment.
                        This Agreement may not be altered or amended, nor any rights
                        hereunder be
                        waived, except by an instrument in writing executed by the
                        party or
                        parties to be charged with such amendment or waiver. No waiver
                        of any
                        term, provision or condition of this Agreement in any one
                        or more
                        instances, shall be deemed to be, or construed as, a further
                        or continuing
                        waiver of any other term, provision or condition of this
                        Agreement.

                    

            

          

        

        

        
          	    13.05        
                  	
                  Assignment.
                    Neither Seller nor Buyer may assign any portion of its rights
                    or delegate
                    any portion of its duties or obligations under this Agreement
                    without the
                    prior written consent of the other
                    party.

                

        

        

        
          	    13.06        
                  	
                  Announcements.
                    Seller and Buyer shall consult with each other with regard to
                    all press
                    releases and other announcements concerning this Agreement or
                    the
                    transaction contemplated hereby and, except as may be required
                    by
                    applicable laws or regulations of any governmental agency, neither
                    Buyer
                    nor Seller shall issue any such press release or make any other
                    announcement without the prior written consent of the other
                    party.

                

        

        

        
          
            
              	    13.07        
                      	
                      Generality
                        of Provisions.
                        The specificity of any representation, warranty, covenant,
                        agreement or
                        indemnity included or provided in this Agreement, or in any
                        exhibit,
                        document, certificate or other instrument delivered pursuant
                        hereto, shall
                        in no way limit the generality of any other representation,
                        warranty,
                        covenant, agreement or indemnity included or provided in
                        this Agreement,
                        or in any exhibit, document, certificate or other instrument
                        delivered
                        pursuant hereto.

                    

            

          

        

        

        
          	    13.08        
                  	
                  Headings.
                    The headings of the articles and sections of this Agreement are
                    for
                    guidance and convenience of reference only and shall not limit
                    or
                    otherwise affect any of the terms or provisions of this
                    Agreement.

                

        

        

        
          	    13.09        
                  	
                  Counterparts.
                    This Agreement may be executed by Buyer and Seller in any number
                    of
                    counterparts and shall be binding upon each party executing same
                    whether
                    or not executed by all parties. Each of the counterparts shall
                    be deemed
                    an original instrument, but all of which together shall constitute
                    but one
                    and the same instrument.

                

        

        

        
          	    13.10        
                  	
                  References.
                    References made in this Agreement, including use of a pronoun,
                    shall be
                    deemed to include where applicable, masculine, feminine, singular
                    or
                    plural, individuals, partnerships or corporations. As used in
                    this
                    Agreement, “person” shall mean any natural person, corporation,
                    partnership, trust, estate or other entity. As used in this Agreement,
                    “affiliate” of a person shall mean any partnership, joint venture,
                    corporation or other entity in which such person has an interest
                    or which
                    controls, is controlled by or is under common control of such
                    person.

                

        

        

        
          	    13.11        
                  	
                  Governing
                    Law.
                    This Agreement, and the transactions contemplated hereby, shall
                    be
                    construed in accordance with, and governed by, the laws of the
                    State of
                    North Dakota. 

                

        

        

        
          
            	    13.12        
                    	
                    Entire
                      Agreement.
                      This Agreement (including the exhibits hereto) constitutes
                      the entire
                      understanding between the parties with respect to the subject
                      matter
                      hereof and supersedes all negotiations, prior discussions and
                      prior
                      agreements and understanding relating to such subject matter.
                      No material
                      representation, warranty, covenant, agreement, promise, inducement
                      or
                      statement, whether oral or written, has been made by Seller
                      or Buyer and
                      relied upon by the other that is not set forth in this Agreement
                      or in the
                      instruments referred to herein, and neither Seller nor Buyer
                      shall be
                      bound by or liable for any alleged representation, warranty,
                      covenant,
                      agreement, promise, inducement or statement not so set
                      forth.

                  

          

        

        

        
          
            	    13.13        
                    	
                    Severability.
                      If
                      any term or provisions of this Agreement shall be determined
                      to be illegal
                      or unenforceable, all other terms and provisions of this Agreement
                      shall
                      nevertheless remain effective and shall be enforced to the
                      fullest extent
                      permitted by applicable law.

                  

          

        

        

        
          
            	    13.14        
                    	
                    Parties
                      in Interest.
                      This Agreement shall be binding upon, and shall inure to the
                      benefit of,
                      the parties hereto and their respective successors and assigns.
                      Nothing
                      contained in this Agreement, express or implied, is intended
                      to confer
                      upon any other person or entity any benefits, rights or
                      remedies.

                  

          

        

        

        EXECUTED
          as of the date first above mentioned.

         

        Eagle
          Operating Inc.

        

        By: /s/
          Robert
          Mau                                                                                       

        Robert
          Mau, President

        

        Petro
          Resources Corporation

        

        By: /s/
          Wayne P.
          Hall                                                                                    

        Wayne
          P. Hall, Chairman and Chief Executive
          OfficerPurchase and Sale Agreement

    EXHIBIT
      10.10

     

     

    
      

      

    

     

    CREDIT
      AGREEMENT

     

     

    Dated
      as of

     

     

    FEBRUARY
      16, 2007

     

    among

     

    PRC
      WILLISTON LLC

     

    as
      the Borrower,

     

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

    as
      the Administrative Agent,

     

    and

     

    THE
      LENDERS PARTY HERETO

     

     

    Sole
      Lead Arranger

    PETROBRIDGE
      INVESTMENT MANAGEMENT LLC

     

     

    
      

      

    

    
      
        
        

      

      
        
        

      

       

    

    TABLE
      OF CONTENTS

     

    
      	ARTICLE I DEFINITIONS AND ACCOUNTING
              MATTERS 	
              1

            
	
              Section
                1.01  Terms
                Defined Above

            	
              1

            
	
              Section
                1.02  Certain
                Defined Terms 

            	
              1

            
	
              Section
                1.03  Terms
                Generally; Rules of Construction

            	
              18

            
	
              Section
                1.04  Accounting
                Terms and Determinations; GAAP

            	
              18

            
	 	
               

            
	
              ARTICLE
                II COMMITMENT 

            	
              18

            
	
              Section
                2.01  Loan;
                Funding of Development Projects

            	
              18

            
	
              Section
                2.02  Borrowings

            	
              19

            
	
              Section
                2.03  Use
                of Proceeds

            	
              20

            
	
              Section
                2.04  Fees

            	
              21

            
	
              Section
                2.05  Notes

            	
              22

            
	 	
               

            
	ARTICLE III PAYMENTS OF PRINCIPAL
              AND
              INTEREST 	
              22

            
	
              Section
                3.01  Repayment
                of Loans

            	
              22

            
	
              Section
                3.02  Interest

            	
              22

            
	
              Section
                3.03  Prepayments

            	
              23

            
	
              Section
                3.04  Mandatory
                Repayments

            	
               

            
	 	
               

            
	ARTICLE IV PAYMENTS; PRO RATA
              TREATMENT; SHARING OF SET-OFFS 	
              24

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

            	
              24

            
	
              Section
                4.02  Presumption
                of Payment by the Borrower 

            	
              25

            
	
              Section
                4.03  Certain
                Deductions by the Administrative Agent 

            	
              25

            
	 	
               

            
	ARTICLE V INCREASED COSTS;
              TAXES 	
              25

            
	
              Section
                5.01  Increased
                Costs

            	
              25

            
	
              Section
                5.02  Taxes

            	
              26

            
	 	
               

            
	ARTICLE VI LOCKBOX PROCEDURES;
              CASUALTY PROCEEDS 	
              26

            
	
              Section
                6.01  Lockbox
                Account

            	
              26

            
	
              Section
                6.02  Notice

            	
              28

            
	
              Section
                6.03  Casualty
                Proceeds

            	
              28

            
	 	
               

            
	ARTICLE VII
              CONDITIONS
              PRECEDENT 	
              29

            
	
              Section
                7.01  Initial
                Funding

            	
              29

            
	
              Section
                7.02  Subsequent
                Commitment Increases

            	
              32

            
	
              Section
                7.03  All
                Fundings

            	
              33

            
	
              Section
                7.04  Conditions
                Precedent for the Benefit of the Lender

            	
              33

            
	
              Section
                7.05  No
                Waiver

            	
              33

            
	 	 
	ARTICLE
              VIII REPRESENTATIONS AND WARRANTIES 	
              33

            
	
              Section
                8.01  Organization;
                Powers

            	
              33

            
	
              Section
                8.02  Authority;
                Enforceability

            	
              34

            
	
              Section
                8.03  Approvals;
                No Conflicts

            	
              34

            
	
              Section
                8.04  Financial
                Condition; No Material Adverse Change

            	
              34

            
	
              Section
                8.05  Litigation

            	
              35

            
	
              Section
                8.06  Environmental
                Matters

            	
              35

            

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

    
      	
              Section
                8.07  Compliance
                with the Laws and Agreements; No Defaults

            	
              36

            
	
              Section
                8.08  Investment
                Company Act

            	
              36

            
	
              Section
                8.09  Acquisition

            	
              36

            
	
              Section
                8.10  Taxes

            	
              37

            
	
              Section
                8.11  ERISA

            	
              37

            
	
              Section
                8.12  Disclosure;
                No Material Misstatements

            	
              38

            
	
              Section
                8.13  Insurance

            	
              38

            
	
              Section
                8.14  Restriction
                on Liens

            	
              39

            
	
              Section
                8.15  Subsidiaries

            	
              39

            
	
              Section
                8.16  Location
                of Business and Offices

            	
              39

            
	
              Section
                8.17  Properties;
                Titles, Etc

            	
              39

            
	
              Section
                8.18  Maintenance
                of Properties

            	
              40

            
	
              Section
                8.19  Gas
                Imbalances, Prepayments

            	
              40

            
	
              Section
                8.20  Marketing
                of Production

            	
              41

            
	
              Section
                8.21  Swap
                Agreements

            	
              41

            
	
              Section
                8.22  Use
                of Loans

            	
              41

            
	
              Section
                8.23  Solvency

            	
              41

            
	
              Section
                8.24  Casualty
                Events

            	
              42

            
	
              Section
                8.25  Material
                Agreements

            	
              42

            
	
              Section
                8.26  Brokers

            	
              42

            
	
              Section
                8.27  Reliance

            	
              42

            
	
              Section
                8.28  Investments
                and Guaranties

            	
              43

            
	
              Section
                8.29  Payments
                by Purchasers of Production

            	
              43

            
	
              Section
                8.30  Existing
                Accounts Payable

            	
              43

            
	 	 
	ARTICLE IX
              AFFIRMATIVE
              COVENANTS 	
              43

            
	
              Section
                9.01  Financial
                Statements; Other Information

            	
              43

            
	
              Section
                9.02  Notices
                of Material Events

            	
              47

            
	
              Section
                9.03  Existence;
                Conduct of Business

            	
              48

            
	
              Section
                9.04  Payment
                of Obligations

            	
              48

            
	
              Section
                9.05  Performance
                of Obligations under Loan Documents

            	
              48

            
	
              Section
                9.06  Operation
                and Maintenance of Properties

            	
              49

            
	
              Section
                9.07  Insurance

            	
              50

            
	
              Section
                9.08  Books
                and Records; Inspection Rights

            	
              50

            
	
              Section
                9.09  Compliance
                with Laws

            	
              50

            
	
              Section
                9.10  Environmental
                Matters

            	
              50

            
	
              Section
                9.11  Further
                Assurances

            	
              51

            
	
              Section
                9.12  Reserve
                Reports

            	
              51

            
	
              Section
                9.13  Title
                Information

            	
              52

            
	
              Section
                9.14  Additional
                Collateral; Additional Guarantors

            	
              53

            
	
              Section
                9.15  ERISA
                Compliance

            	
              53

            
	
              Section
                9.16  Swap
                Agreements

            	
              54

            
	
              Section
                9.17  Marketing
                of Production

            	
              54

            
	
              Section
                9.18  Overriding
                Royalty Interests

            	
              54

            
	
              Section
                9.19  Right
                of First Refusal

            	
              55

            
	
              Section
                9.20  Separate
                Entity

            	
              55

            
	
              Section
                9.21  Members
                of Borrower; Observers

            	
              55

            
	
              Section
                9.22  Meetings
                with Operator; Observers

            	
              56

            
	
              Section
                9.23  Equity
                Raise

            	
              56

            
	 	 
	ARTICLE X NEGATIVE
              COVENANTS 	
              56

            
	
              Section
                10.01     Financial
                Covenants 

            	
              56

            

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
              Section
                10.02  Debt 

            	
              57

            
	
              Section
                10.03  Liens

            	
              58

            
	
              Section
                10.04  Restricted
                Payments

            	
              58

            
	
              Section
                10.05  Investments,
                Loans and Advances

            	
              58

            
	
              Section
                10.06  Nature
                of Business

            	
              59

            
	
              Section
                10.07  Limitation
                on Leases

            	
              59

            
	
              Section
                10.08  Sale
                and Leasebacks

            	
              59

            
	
              Section
                10.09  Proceeds
                of Notes

            	
              59

            
	
              Section
                10.10  ERISA
                Compliance

            	
              59

            
	
              Section
                10.11  Sale
                or Discount of Receivables

            	
              60

            
	
              Section
                10.12  Mergers,
                Etc.

            	
              61

            
	
              Section
                10.13  Sale
                of Properties

            	
              61

            
	
              Section
                10.14  Environmental
                Matters

            	
              61

            
	
              Section
                10.15  Transactions
                with Affiliates

            	
              61

            
	
              Section
                10.16  Capital
                Expenditures

            	
              61

            
	
              Section
                10.17  Material
                Agreements

            	
              61

            
	
              Section
                10.18  Subsidiaries

            	
              62

            
	
              Section
                10.19  Negative
                Pledge Agreements; Dividend Restrictions

            	
              62

            
	
              Section
                10.20  Gas
                Imbalances, Take-or-Pay or Other Prepayments

            	
              62

            
	
              Section
                10.21  Swap
                Agreements

            	
              62

            
	
              Section
                10.22  Certain
                Activities

            	
              63

            
	
              Section
                10.23  Net
                Sales

            	
              63

            
	
              Section
                10.24  G&A
                Costs

            	
              63

            
	
              Section
                10.25  Press
                Release

            	
              63

            
	
              Section
                10.26  Consolidated
                Subsidiaries

            	
              63

            
	
              Section
                10.27  Acquisition
                Documents

            	
              63

            
	 	 
	ARTICLE XI
              EVENTS OF
              DEFAULT; REMEDIES 	
              63

            
	
              Section
                11.01  Events
                of Default

            	
              63

            
	
              Section
                11.02  Remedies

            	
              65

            
	
              Section
                11.03  Disposition
                of Proceeds

            	
              66

            
	 	 
	
              ARTICLE
                XII THE ADMINISTRATIVE AGENT 

            	
              66

            
	
              Section
                12.01  Appointment;
                Powers

            	
              66

            
	
              Section
                12.02  Duties
                and Obligations of Administrative Agent

            	
              67

            
	
              Section
                12.03  Action
                by Administrative Agent

            	
              67

            
	
              Section
                12.04  Reliance
                by Administrative Agent

            	
              68

            
	
              Section
                12.05  Subagents

            	
              68

            
	
              Section
                12.06  Resignation
                or Removal of Administrative Agent

            	
              68

            
	
              Section
                12.07  Agents
                as Lenders

            	
              69

            
	
              Section
                12.08  No
                Reliance

            	
              69

            
	
              Section
                12.09  Authority
                of Administrative Agent to Release Collateral and Liens

            	
              69

            
	 	 
	
              ARTICLE
                XIII MISCELLANEOUS 

            	
              70

            
	
              Section
                13.01  Notices

            	
              70

            
	
              Section
                13.02  Waivers;
                Amendments

            	
              70

            
	
              Section
                13.03  Expenses,
                Indemnity; Damage Waiver

            	
              71

            
	
              Section
                13.04  Successors
                and Assigns

            	
              73

            
	
              Section
                13.05  Survival;
                Revival; Reinstatement

            	
              76

            
	
              Section
                13.06  Counterparts;
                Integration; Effectiveness

            	
              76

            
	
              Section
                13.07  Severability

            	
              77

            
	
              Section
                13.08  Right
                of Setoff

            	
              77

            

    

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

     

    
      	
              Section
                13.09  Governing
                Law; Jurisdiction; Consent to Service of Process

            	
              77

            
	
              Section
                13.10  Headings

            	
              78

            
	
              Section
                13.11  Confidentiality

            	
              78

            
	
              Section
                13.12  Interest
                Rate Limitation

            	
              79

            
	
              Section
                13.13  Exculpation
                Provisions

            	
              79

            
	
              Section
                13.14  Collateral
                Matters; Swap Agreements

            	
              80

            
	
              Section
                13.15  No
                Third Party Beneficiaries

            	
              80

            
	
              Section
                13.16  Securitization

            	
              80

            
	
              Section
                13.17  USA
                Patriot Act Notice

            	
              81

            

    

    
      
         

         

        
          
            
              
              

            

            
              iv

              
                

              

            

            
              
              

            

          

        

        
           

          Annexes,
            Exhibits and Schedules

          
             

            
              
                	Annex I  	List of Commitments 
	Exhibit A  	Form of Note 
	Exhibit B-1 	Form of Initial Funding Disbursement
                        Request 
	Exhibit B-2 	Form of Subsequent Commitment
                        Increase
                        Request 
	Exhibit B-3 	Form
                        of Invoice Disbursement Request 
	Exhibit C 	Form of Direction Letter 
	Exhibit D 	Form
                        of Compliance Certificate 
	Exhibit E-1 	Form of Legal Opinion of Miles
                        O. Smith,
                        special counsel to the Borrower 
	Exhibit E-2 	Form of Legal Opinion of Crowley,
                        Haughey,
                        Hanson, Toole & Dietrich P.L.L.P., special North Dakota counsel to
                        Borrower 
	Exhibit F-1 	Security Instruments 
	Exhibit F-2 	Form of Guarantee and Pledge
                        Agreement 
	Exhibit G 	Form
                        of Assignment and Assumption 
	Exhibit H  	Form of Assignment of Overriding
                        Royalty
                        Interest  
	Exhibit I 	Form of Participation
                        Agreement 
	Exhibit J 	Form of Letter-in-Lieu 
	Exhibit K 	Development Plan 
	 	 
	Schedule 1.01  	AFE Requirements 
	Schedule 1.02 	Approved Counterparties 
	Schedule 8.05 	Litigation 
	Schedule 8.06  	Environmental Matters 
	Schedule 8.13 	Insurance 
	Schedule 8.15 	Subsidiaries and
                        Partnerships 
	Schedule 8.17	Title to Properties 
	Schedule 8.19 	Gas Imbalances 
	Schedule 8.20  	Marketing Contracts 
	Schedule 8.21 	Swap Agreements 
	Schedule 8.25 	Material Agreements 
	Schedule 8.30 	Past
                        Due Accounts Payable 
	Schedule 9.02(e) 	Notice of Certain Events 
	Schedule 10.02 	Debt 
	Schedule 10.03 	Excepted Liens 
	Schedule 10.05 	Investments 
	Schedule 10.07 	Leases 
	Schedule 10.23 	Net Sales
                        Volumes 

              

            

              

            
              
                
                

              

              
                v

                
                  

                

              

              
                
                

              

            

             

          

        

      

    

    This
      CREDIT AGREEMENT
      dated as
      of February 16, 2007, is among PRC Williston LLC, a limited liability company
      duly formed and existing under the laws of the State of Delaware (the
“Borrower”);
      each
      of the Lenders from time to time party hereto; D.B. Zwirn Special Opportunities
      Fund, L.P., a Delaware limited partnership, as administrative agent for the
      Lenders (in such capacity, together with its successors in such capacity, the
      “Administrative
      Agent”).

     

    R
      E C I T A L S

     

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

     

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

     

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

     

    ARTICLE
      I

    Definitions
      and Accounting Matters

    

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

       

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

       

    

    “Acquisition”
means
      the acquisition of certain oil, gas and mineral Properties pursuant to the
      terms
      and conditions of the Acquisition Documents.

     

    “Acquisition
      Documents”
means
      (a) the Purchase and Sale Agreement between Eagle Operating Inc., as Seller,
      and
      Petro Resources Corporation, as Buyer, dated December 11, 2006, as amended
      on or
      about January 25, 2007 to be effective January 25, 2007 (the “PSA”),
      and
      (b) all bills of sale, assignments, agreements, instruments and documents
      executed and delivered in connection therewith, as amended.

     

    “Acquisition
      Properties”
means
      the Oil and Gas Properties and other properties acquired by the Borrower or
      any
      Guarantor pursuant to the Acquisition Documents.

     

    “Affiliate”
means,
      with respect to a specified Person, another Person that directly, or indirectly
      through one or more intermediaries, Controls or is Controlled by or is under
      common Control with the Person specified. For purposes of this Agreement,
      however, Eagle and its shareholders will not be considered an
      Affiliate.

     

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

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

       

    

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

     

    “Applicable
      Rate”
means,
      for any day, with respect to any Loan, the then current Prime Rate plus two
      percent (2%) per annum, provided that, for purposes of this Agreement, the
      Prime
      Rate shall not be less than 7.5%.

     

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

     

    “Approved
      Petroleum Engineers”
means
      Cawley, Gillespie and Associates or any independent petroleum engineers
      reasonably acceptable to the Administrative Agent.

     

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

     

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

     

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

     

    “Borrowing”
means
      Loans made on the same date.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

    “Change
      in Control”
means
      any time when Petro Resources Corporation shall cease to own, collectively,
      beneficially and of record, directly or indirectly, 100% of the membership
      interests in the Borrower.

     

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

     

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

     

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

     

    “Commitment”
means,
      with respect to each Lender, the commitment of such Lender to make Loans
      hereunder, expressed as an amount representing the maximum aggregate amount
      of
      such Lender’s Loans hereunder. The amount representing each Lender’s Commitment
      is set forth on Annex
      I.
      Initially, the aggregate amount of the Commitments of the Lenders shall be
      equal
      to the Initial Commitment; provided,
      however,
      that
      the Lenders may in their sole discretion, but shall be under no obligation
      whatsoever to do so, make Loans hereunder above the Initial Commitment up to
      an
      aggregate amount equal to the sum of the Lenders’ Commitments as set forth on
Annex
      I.

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

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

     

    “Eagle”
means
      Eagle Operating, Inc., a North Dakota corporation which is the operator of
      the
      Oil and Gas Properties and the Seller under the PSA which is part of the
      Acquisition Documents.

     

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

     

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

     

    “Environmental
      Laws”
means
      any and all Governmental Requirements pertaining in any way to health, safety,
      the environment or the preservation or reclamation of natural resources, in
      effect in any and all jurisdictions in which the Borrower or any Subsidiary
      is
      conducting or at any time has conducted business, or where any Property of
      the
      Borrower or any Subsidiary is located, including without limitation, the Oil
      Pollution Act of 1990 (“OPA”),
      as
      amended, the Clean Air Act, as amended, the Comprehensive Environmental,
      Response, Compensation, and Liability Act of 1980 (“CERCLA”),
      as
      amended, the Federal Water Pollution Control Act, as amended, the Occupational
      Safety and Health Act of 1970, as amended, the Resource Conservation and
      Recovery Act of 1976 (“RCRA”),
      as
      amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
      Act, as amended, the Superfund Amendments and Reauthorization Act of 1986,
      as
      amended, the Hazardous Materials Transportation Act, as amended, and other
      environmental conservation or protection Governmental Requirements. The term
      “oil” shall have the meaning specified in OPA, the terms “hazardous
      substance”
and
      “release”
(or
      “threatened
      release”)
      have
      the meanings specified in CERCLA, the terms “solid
      waste”
and
      “disposal”
(or
      “disposed”)
      have
      the meanings specified in RCRA and the term “oil
      and gas waste”
shall
      mean those waste that are excluded from the definition of “hazardous
      waste”
      pursuant to 40 C.F.R. Section 261.4(b)(5) (“Section
      261.4(b)(5)”);
      provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section
      261.4(b)(5) is amended so as to broaden the meaning of any term defined thereby,
      such broader meaning shall apply subsequent to the effective date of such
      amendment and (b) to the extent the laws of the state or other jurisdiction
      in
      which any Property of the Borrower or any Subsidiary is located establish a
      meaning for “oil,”
      “hazardous
      substance,”
      “release,”
      “solid
      waste,”
      “disposal”
or
      “oil
      and gas waste”
which
      is broader than that specified in either OPA, CERCLA, RCRA or Section
      261.4(b)(5), such broader meaning shall apply.

     

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

       

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    “Financial
      Officer”
means,
      for any Person, the president, 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 Borrower and its Consolidated
      Subsidiaries, as referred to in Section
      9.01(a)
      and
Section
      9.01(b).

     

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

    “Highest
      Lawful Rate”
shall
      mean, on any day, the maximum nonusurious rate of interest permitted for that
      day by whichever of applicable federal, New York or Delaware law permits the
      higher interest rate, stated as a rate per annum. 

     

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

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    “Indemnified
      Taxes”
means
      Taxes other than Excluded Taxes.

     

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

     

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

     

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

     

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

     

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

     

    “Initial
      Reserve Report”
means
      a
      report prepared by Cawley, Gillespie and Associates, dated as of December 5,
      2006, with respect to certain Oil and Gas Properties of the Borrower and any
      Consolidated Subsidiaries and the Acquisition Properties (including those being
      acquired pursuant to the Acquisition Documents) as of January 1,
      2007.

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

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

     

    “Lenders”
means
      the Persons listed on Annex
      I,
      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.

     

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

     

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

     

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

     

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

     

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

     

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

       

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

       

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    “Maturity
      Date”
means
      the date that is four years after the Effective Date unless otherwise
      accelerated pursuant to Section
      11.02.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

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

     

    “OPA”
has
      the
      meaning given such term in the definition of Environmental Laws.

     

    “Operating
      Account”
means
      an account designated by the Borrower from time to time by written notice to
      the
      Administrative Agent and the Lenders.

     

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

     

    “Operator”
means
      the Operator of Borrower’s Oil and Gas Properties, which Operator shall
      initially be Eagle, and any successor operators.

     

    “ORRI
      Assignment”
means
      that certain Assignment of Overriding Royalty Interest in the form attached
      hereto as Exhibit H
      from the
      Borrower to Lenders.

     

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

     

    “Parent”
means
      Petro Resources Corporation.

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Quarterly
      Planning Meeting”
means
      a
      formal planning meeting each fiscal quarter between the Borrower and the
      Operator as provided for in the Acquisition Documents.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    “Swap
      Agreement”
means
      any agreement with respect to any swap, forward, future or derivative
      transaction or option or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or
      more rates, currencies, commodities, equity or debt instruments or securities,
      or economic, financial or pricing indices or measures of economic, financial
      or
      pricing risk or value or any similar transaction or any combination of these
      transactions; provided
      that no
      phantom stock or similar plan providing for payments only on account of services
      provided by current or former directors, officers, employees or consultants
      of
      the Borrower or the 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 thereof
      is
      obligated to either purchase for an amount in excess of, or pay upon early
      termination an amount in excess of, 80% of the residual value of the Property
      subject to such operating lease upon expiration or early termination of such
      lease.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

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

         

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

         

        ARTICLE
          II

        Commitment

         

        Section
          2.01  Loan;
          Funding of Development Projects.

         

        (a)  Loans.
          Subject
          to the terms and conditions of this Agreement, each Lender severally agrees
          to
          make Loans to the Borrower in an aggregate principal amount not to exceed
          its
          Applicable Percentage of an initial commitment of the Lenders of Twenty
          Million
          Two Hundred Seventy Three Thousand One Hundred Eighty Three Dollars
          ($20,273,183) (the “Initial
          Commitment”),
          with
          subsequent Loans in an aggregate principal amount not to exceed such Lender’s
          Applicable Percentage of up to Fifty-Four Million Seven Hundred Twenty
          Six
          Thousand Eight Hundred Seventeen Dollars ($54,726,817), in the manner and
          for
          the purposes provided in Section
          2.01(b),
          Section
          2.02(b)
          and
Section
          2.03(b)
          (“Subsequent
          Commitment Increases”);
          provided,
          however,
          that
          the aggregate amount of all Loans made hereunder shall not exceed Seventy-Five
          Million Dollars ($75,000,000). The Initial Funding shall be utilized only
          for
          the purposes described in Section
          2.03(a).
          Any
          amount of the Commitments which has not been borrowed by the Borrower prior
          to
          August 16, 2010 (the “Commitment
          Termination Date”)
          shall
          not be available to the Borrower for Loans from and after such Commitment
          Termination Date.

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

           

        

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

         

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

        

      

    

     

    (a)  Initial
      Funding.
      On the
      Effective Date, each Lender shall severally make a Loan to the Borrower in
      an
      amount equal to such Lender’s Applicable Percentage of the first Seventeen
      Million Five Hundred Sixty Thousand Seven Hundred Forty Two Dollars
      ($17,560,742) of the Initial Commitment (the “Initial
      Funding”)
      as set
      forth in the Initial Funding Disbursement Request delivered to such Lender
      by
      11:00 a.m. at least five Business Days prior to the Effective Date and approved
      by the Lenders.
      The
      remaining Five Million Dollars ($2,712,441) of the Initial Commitment will
      be
      funded in accordance with Section
      2.02(b).

     

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

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

    (i)  fund
      the
      Acquisition in the amount of $10,000,000, adjusted as provided in the PSA for
      prorations, $600,000 of which will be disbursed to the Borrower as a credit
      against sums advanced to Eagle for acquisition of the Oil and Gas Properties
      acquired pursuant to the PSA, and the balance disbursed directly to
      Eagle;

     

    (ii)  fund
      drilling and development of Oil and Gas Properties, in the amount of $2,653,648,
      consisting of capital costs required of the Borrower under the PSA which shall
      be disbursed directly to Eagle;

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    (iii)  pay
      an
      amount up to $299,604 related to the commitment fee; and 

     

    (iv)  pay
      transaction costs, financial advisor fees, and fund working capital needs of
      up
      to $4,607,490 with respect to the closing of the transaction contemplated by
      this Agreement (including Arranger’s and the Lender’s transaction costs) and pay
      certain other costs as set forth in the Initial Funding Disbursement Request
      approved by the Lenders.

     

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

     

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

     

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

     

    (iii)  pay
      any
      amounts due under Section
      2.04;
      and

     

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

     

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

     

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

     

    Section
      2.04  Fees.
      

     

    (a)  Commitment
      Fee.
      The
      Borrower shall pay to Administrative Agent a fee equal to 1.5% of all amounts
      committed to be loaned to the Borrower hereunder, as follows: (i)
      in
      connection with the Initial Funding, Borrower will pay $300,000 with respect
      to
      the amounts committed under the Initial Commitment, and (ii)
      the
      Borrower will pay on the date that any Subsequent Commitment Increase Request
      has been approved by each of the Lenders a fee equal to 1.5% of the amounts
      committed under the then subject Subsequent Commitment Increase in excess of
      the
      Initial Commitment and such other previously committed funding to the extent
      that such fee has not been paid previously (“Commitment
      Fee”). 

     

    (b)  Administrative
      Fee.
      Beginning on August 15, 2007 and thereafter, the Borrower shall pay to the
      Administrative Agent a semi-annual administrative fee of $25,000 on each
      February 15 and August 15 of each year that this Agreement is in effect in
      arrears and on the Credit Agreement Termination Date. 

     

    
      
        
        

      

      
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    (c)  Bridge
      Fee.
      If the
      Borrower repays any Indebtedness hereunder with the proceeds from the issuance
      of Equity Interests, the Borrower shall pay to the Administrative Agent a fee
      of
      2.5% on all amounts repaid, provided that in no event shall the aggregate fees
      under this Section
      2.04(c)
      be
      greater than $250,000. 

     

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

     

    ARTICLE
      III

    Payments
      of Principal and Interest

     

    Section
      3.01  Repayment
      of Loans.

     

    (a)  On
      each
      Monthly Date after the Effective Date (each such date being a “Disbursement
      Date”)
      and
      thereafter, the Borrower shall repay principal (through Administrative Agent
      disbursing such funds from the Lockbox Account) by an amount equal to one
      hundred percent (100%) of the difference between (i)
      the
      Residual Balance in the Lockbox Account as of each Disbursement Date less
(ii)
      interest, fees, taxes, development costs and General and Administrative Costs
      paid pursuant to Section
      6.01(b)(v)
      -
      Section 6.01(b)(x).
      

     

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

     

    Section
      3.02  Interest.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    Section
      3.03  Prepayments.

     

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

     

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

     

    (c)  No
      Penalty.
      Other
      than the fees paid pursuant to Section
      2.04(c),
      prepayments permitted or required under this Article III
      shall be
      without premium or penalty.

     

    Section
      3.04  Mandatory
      Repayments.
      

     

    (a)  Sale
      of Properties.
      In the
      event that the Borrower or its Subsidiaries sell, assign or otherwise dispose
      of
      any of their Oil and Gas Properties (other than asset sales permitted by
Section
      10.13(a)
      and
(b),
      then
      the Borrower shall prepay the Loans together with accrued interest on such
      portion of the Loans so prepaid in accordance with Section
      3.02(c)
      on the
      date of such sale or other disposition of the Oil and Gas Properties occurs
      in
      an aggregate amount equal to, unless otherwise agreed to in writing by the
      Lenders, the proceeds of such sale or disposition, less the actual costs and
      fees associated with such sale or disposition provided that such costs and
      fees
      are not in excess of 3% of the proceeds from such sale or disposition or are
      otherwise approved by the Lenders.

     

    
      
        
        

      

      
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    ARTICLE
      IV

    Payments;
      Pro Rata Treatment; Sharing of Set-offs

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    ARTICLE
      V

    Increased
      Costs; Taxes

     

    Section
      5.01  Increased
      Costs.

     

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

     

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

     

    
      
        
        

      

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

     

    Section
      5.02  Taxes.

     

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

     

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

     

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

     

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

     

    ARTICLE
      VI

    Lockbox
      Procedures; Casualty Proceeds

     

    Section
      6.01  Lockbox
      Account.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (iii)  Operating
      Costs in an amount equal to the lesser of actual Operating Costs for the
      applicable month or $85,000; 

     

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

     

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

     

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

     

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

     

    (viii)  General
      and Administrative Costs, approved by the Lender; 

     

    
      
        
        

      

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

     

    (x)  if
      the
      Borrower elects to be taxed as a partnership or similar “pass through” entity,
      payment of Quarterly Taxes of the partners of the Borrower for the applicable
      fiscal quarter;

     

    (xi)  any
      remaining amounts after Borrower has established a balance of $25,000 in the
      Lockbox Account, to the Borrower in the Operating Account.

     

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

     

    (d)  Upon
      the
      Credit Agreement Termination Date, all amounts remaining in the Lockbox Account
      shall be disbursed to the Borrower to
      the
      Operating Account.

     

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

     

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

     

    
      
        
        

      

      
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    ARTICLE
      VII

    Conditions
      Precedent

     

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

     

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

     

    (b)  The
      Administrative Agent shall have received a certificate of a Responsible Officer
      of the Borrower setting forth (i)
      approval
      by the members of the Borrower with respect to the authorization of the Borrower
      to execute and deliver the Loan Documents to which the Borrower is a party
      and
      to enter into the transactions contemplated in those documents, (ii)
      the
      officers of the Borrower (y) who are authorized to sign the Loan Documents
      to
      which the Borrower is a party and (z) who will, until replaced by another
      officer or officers duly authorized for that purpose, act as its representative
      for the purposes of signing documents and giving notices and other
      communications in connection with this Agreement and the transactions
      contemplated hereby, (iii)
      specimen
      signatures of such authorized officers, and (iv)
      the
      certificate of formation and limited liability company agreement, of the
      Borrower, certified as being true and complete. The Administrative Agent and
      the
      Lenders may conclusively rely on such certificate until the Administrative
      Agent
      receives notice in writing from the Borrower to the contrary.

     

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

     

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

     

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

     

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

     

    (g)  The
      Borrower shall have delivered to the Administrative Agent the Initial Funding
      Disbursement Request in the amount of $17,560,742.

     

    
      
        
        

      

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

     

    (i)  The
      Administrative Agent shall have received from each party thereto duly executed
      counterparts of the Participation Agreement.

     

    (j)  The
      Administrative Agent shall have received from each party thereto duly executed
      counterparts (in such number as may be requested by the Administrative Agent)
      of
      the Security Instruments, including the Guarantee and Pledge Agreement and
      the
      other Security Instruments described on Exhibit
      F-1.
      In
      connection with the execution and delivery of the Security Instruments, the
      Administrative Agent shall be reasonably satisfied that the Security Instruments
      create first priority, perfected Liens on the Collateral, such Liens being
      subject only to Excepted Liens identified in clauses (a) through (j) of the
      definition thereof, but subject to the provisos at the end of such
      definition.

     

    (k)  The
      Administrative Agent shall have received an opinion of (i) Miles O. Smith,
      special counsel to the Borrower, substantially in the form of Exhibit E-1
      hereto
      and (ii) Crowley, Haughey, Hanson, Toole & Dietrich P.L.L.P., special North
      Dakota counsel to the Borrower, substantially in the form of Exhibit
      E-2
      hereto.

     

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

     

    (m)  The
      Administrative Agent shall have received title information as the Administrative
      Agent may require satisfactory to the Administrative Agent setting forth the
      status of title to the Borrower’s and/or its Subsidiaries’ Oil and Gas
      Properties evaluated in the Initial Reserve Report as of the Effective
      Date. 

     

    (n)  The
      Administrative Agent shall be satisfied with the environmental condition of
      the
      Oil and Gas Properties of the Borrower.

     

    (o)  The
      Administrative Agent shall have received a certificate of a Responsible Officer
      of the Borrower certifying that (i) the Borrower has received all consents
      and
      approvals required by Section
      8.03
      and (ii)
      the Borrower has received, directly or indirectly, at least $10,500,000 from
      its
      Equity Interest holders for use in acquiring the Properties described in the
      PSA
      and to fund future Operating Costs in excess of $85,000 per month.

     

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

     

    (q)  The
      Administrative Agent shall have received appropriate UCC search certificates
      reflecting no prior Liens encumbering the Properties the Borrower for each
      of
      the following jurisdictions: North Dakota, Delaware, and any other jurisdiction
      requested by the Administrative Agent.
      The
      Administrative Agent shall have received appropriate UCC search certificates
      reflecting no prior Liens encumbering the Equity Interests of the
      Borrower.

     

    
      
        
        

      

      
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    (r)  The
      Administrative Agent shall be satisfied that there are no negative price
      deviations in the oil and gas prices since January 15, 2007 that would have
      a
      Material Adverse Effect on the value of the Borrower’s Oil and Gas
      Properties.

     

    (s)  The
      Administrative Agent shall be satisfied that there has been no Material Adverse
      Effect to the Parent, the Borrower or any of its Subsidiaries since January
      1,
      2007.

     

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

     

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

     

    (v)  Since
      January 15, 2007, there shall not have been any disruption or adverse change
      in
      the financial or capital markets.

     

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

     

    (x)  Completion
      by the Administrative Agent and the Lenders of a satisfactory due diligence
      review, including, but not limited to the review of all engineering, operations,
      land, title, environmental and financial data or information.

     

    (y)  Satisfactory
      due diligence review of the Borrower’s material agreements, including, but not
      limited to, satisfactory review of the operating agreements governing the Oil
      and Gas Properties, marketing agreements, transportation agreements and
      processing agreements. 

     

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

     

    (aa)  The
      Administrative Agent shall have received (i)
      a
      certificate of a Responsible Officer of the Borrower certifying: (A) that the
      Borrower is concurrently consummating the Acquisition in accordance with the
      terms of the Acquisition Documents (with all of the material conditions
      precedent thereto having been satisfied in all material respects by the parties
      thereto) and acquiring substantially all of the Acquisition Properties
      contemplated by the Acquisition Documents; (B) as to the final purchase price
      for the Acquisition Properties after giving effect to all adjustments as of
      the
      closing date contemplated by the Acquisition Documents and specifying, by
      category, the amount of such adjustment; (C) that attached thereto is a true
      and
      complete list of the Acquisition Properties which have been excluded from the
      Acquisition pursuant to the terms of the Acquisition Documents, specifying
      with
      respect thereto the basis of exclusion as (1) title defect, (2) preferential
      purchase right, (3) environmental or (4) casualty loss; (D) that attached
      thereto is a true and complete list of all Acquisition Properties for which
      any
      seller has elected to cure a title defect, (E) that attached thereto is a true
      and complete list of all Acquisition Properties for which any seller has elected
      to remediate an adverse environmental condition, and (F) that attached thereto
      is a true and complete list of all Acquisition Properties which are currently
      pending final decision by a third party regarding purchase of such property
      in
      accordance with any preferential right; (ii)
      a true
      and complete executed copy of each of the Acquisition Documents; (iii)
      original
      counterparts or copies, certified as true and complete, of the assignments,
      deeds and leases for all of the Acquisition Properties; and (iv)
      such
      other related documents and information as the Administrative Agent shall have
      reasonably requested.

     

    
      
        
        

      

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

     

    The
      Administrative Agent shall notify the Borrower and the Lenders of the Effective
      Date, and such notice shall be conclusive and binding. Notwithstanding the
      foregoing, the obligations of the Lenders to make Loans hereunder shall not
      become effective unless each of the foregoing conditions is satisfied (or waived
      pursuant to Section
      13.02)
      at or
      prior to 2:00 p.m., New York City time, on April 1, 2007 (and, in the event
      such
      conditions are not so satisfied or waived, the Commitments shall terminate
      at
      such time).

     

    Section
      7.02  Subsequent
      Commitment Increases.
      The
      obligation of the Lenders to make Loans to the Borrower with respect to any
      Subsequent Commitment Increases is subject to the following
      conditions:

     

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

     

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

     

    (c)  In
      the
      case of a Subsequent Commitment Increase relating to the acquisition of any
      additional Oil and Gas Properties, the satisfaction of the conditions (modified
      as appropriate to apply to such additional Oil and Gas Properties) set forth
      in
Sections
      7.01(b),
      (h),
      (j),
      (l),
      (m),
      (n),
      (q),
      (t),
      (u),
      (y),
      (z)
      and
(bb)
      with
      respect to such additional Oil and Gas Properties.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
      VIII

    Representations
      and Warranties

     

    The
      Borrower represents and warrants to the Lenders that:

     

    Section
      8.01  Organization;
      Powers. The
      Borrower and the Subsidiaries are
      duly
      formed, validly existing and in good standing under the laws of the jurisdiction
      of its formation, has all requisite power and authority, and has all material
      governmental licenses, authorizations, consents and approvals necessary, to
      own
      its assets and to carry on its business as now conducted, and is qualified
      to do
      business in, and is in good standing in, every jurisdiction where such
      qualification is required, except where failure to have such power, authority,
      licenses, authorizations, consents, approvals and qualifications could not
      reasonably be expected to have a Material Adverse Effect. Borrower has no
      Subsidiaries as of the date of this Agreement and will not have a Subsidiary
      as
      of the date of the Initial Funding.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

       

    

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

     

    Section
      8.03  Approvals;
      No
      Conflicts.
      The
      Transactions i.
      do not
      require any consent or approval of, registration or filing with, or any other
      action by, any Governmental Authority or any other third Person (including
      members of the Borrower, members, shareholder or any class of directors, whether
      interested or disinterested, of any Person), nor is any such consent, approval,
      registration, filing or other action necessary for the validity or
      enforceability of any Loan Document or the consummation of the transactions
      contemplated thereby, except such as have been obtained or made and are in
      full
      force and effect other than 1.
      the
      recording and filing of the Security Instruments as required by this Agreement
      and 2.
      those
      third party approvals or consents that, if not made or obtained, would not
      cause
      a Default hereunder, could not reasonably be expected to have a Material Adverse
      Effect or do not have an adverse effect on the enforceability of the Loan
      Documents, ii.
      will not
      violate any applicable law or regulation or the organizational or formation
      documents of the Parent, the Borrower or any Subsidiary or any order of any
      Governmental Authority, iii.
      will not
      violate or result in a default under any indenture, agreement or other
      instrument binding upon the Parent, Borrower or any Subsidiary or its
      Properties, or give rise to a right thereunder to require any payment to be
      made
      by the Parent, Borrower or such Subsidiary and iv.
      will not
      result in the creation or imposition of any Lien on any Property of the Parent,
      Borrower or any Subsidiary (other than the Liens created by the Loan
      Documents).

     

    Section
      8.04  Financial
      Condition; No Material Adverse Change.

     

    (a)  The
      Parent has heretofore furnished to the Administrative Agent and the Arranger
      its
      unaudited consolidated balance sheet and statements of income, capital and
      cash
      flows for the Borrower and its Consolidated Subsidiaries as of and for the
      fiscal year ended December 31, 2006, certified by its Financial Officer. Such
      financial statements present fairly, in all material respects, the financial
      position and results of operations and cash flows of the Borrower and its
      Consolidated 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
      January 15, 2007, (i)
      there
      has been no event, development or circumstance that has had or could reasonably
      be expected to have a Material Adverse Effect and (ii)
      the
      business of the Borrower or its Subsidiaries, if any, has been conducted only
      in
      the ordinary course consistent with past business practices.

     

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

     

    
      
        
        

      

      
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    Section
      8.05  Litigation.

     

    (a)  Except
      as
      set forth on Schedule 8.05,
      there
      are no actions, suits, investigations or proceedings by or before any arbitrator
      or Governmental Authority pending against or, to the knowledge of the Borrower,
      threatened against or affecting the Borrower or any Subsidiary or involving
      the
      Acquisition (i)
      that are
      not fully covered by insurance (except for normal deductibles), (ii)
      that
      involve any Loan Document, any Acquisition Document or the Transactions or
      (iii)
      that
      could impair the consummation of the Acquisition on the time and in the manner
      contemplated by the Acquisition Documents.

     

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

     

    Section
      8.06  Environmental
      Matters.
      Except
      for such matters as set forth on Schedule
      8.06
      or that,
      individually or in the aggregate, could not reasonably be expected to have
      a
      Material Adverse Effect on the Borrower:

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

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

     

    (g)  there
      has
      been no exposure of any Person or property to any Hazardous Materials as a
      result of or in connection with the operations and businesses of any of the
      Borrower’s or its Subsidiaries’ Properties that would reasonably be expected to
      form the basis for a claim for damages or compensation and there are no
      conditions or circumstances that would reasonably be expected to result in
      the
      receipt of notice regarding such exposure; and

     

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

     

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

     

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

     

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

     

    (c)  No
      Default has occurred and is continuing.

     

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

     

    Section
      8.09  Acquisition.
      The
      copies of the Acquisition Documents previously delivered by the Borrower to
      the
      Administrative Agent are true, accurate and complete and have not been amended
      or modified in any manner, other than pursuant to amendments or modifications
      previously delivered to the Administrative Agent. No party to any Acquisition
      Document is in default in respect of any material term or obligation
      thereunder.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

       

    

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

     

    Section
      8.11  ERISA.

     

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

     

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

     

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

     

    (d)  No
      Plan
      (other than a defined contribu-tion plan) or any trust created under any such
      Plan has been terminated since September 2, 1974. No liability to the PBGC
      (other than for the payment of current premiums that are not past due) by the
      Borrower, any Subsidiary or any ERISA Affiliate has been or is expected by
      the
      Borrower, 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 Borrower, the
      Subsidiaries (if any) or any ERISA Affiliate is required under the terms of
      each
      Plan or applicable law to have paid as contribu-tions to such Plan as of the
      date hereof, and no accumulated funding deficiency (as defined in section 302
      of
      ERISA and section 412 of the Code), whether or not waived, exists with respect
      to any Plan.

     

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

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

    Section
      8.12  Disclosure;
      No Material Misstatements.
      None of
      the written information, statements, exhibits, certificates, documents or
      reports furnished to either the Administrative Agent or the Lenders by the
      Borrower or any of its Affiliates in connection with the negotiation of this
      Agreement and the other Loan Documents contained any material misstatement of
      fact or omitted to state a material fact or any fact necessary to make the
      statement contained therein not materially misleading in the light of the
      circumstances in which made and with respect to the Borrower and its Affiliates
      taken as a whole. There is no fact peculiar to the Borrower or any of its
      Affiliates which has a Material Adverse Effect or in the future is reasonably
      likely to have (so far as the Borrower can now foresee) a Material Adverse
      Effect and which has not been set forth in this Agreement, the Loan Documents
      or
      the other documents, certificates and statements furnished to the Administrative
      Agent and the Lenders by or on behalf of the Borrower or its Affiliates prior
      to, or on, the Effective Date in connection with the transactions contemplated
      hereby. There are no statements or conclusions in any Reserve Report taken
      as a
      whole that are based upon or include misleading information or fail to take
      into
      account material information regarding the matters reported therein which is
      (i)
      supplied by or on behalf of the Borrower, or (ii) though the information is
      not
      supplied by the Borrower, the Borrower has actual knowledge of its misleading
      nature.

     

    Section
      8.13  Insurance.
      Schedule
      8.13
      attached
      hereto contains an accurate and complete description of all material policies
      of
      fire, liability, workmen’s compensation and other forms of insurance that are
      owned or held by or on behalf of the Borrower. All such policies are in full
      force and effect, all premiums with respect thereto covering all periods up
      to
      and including the date of the closing have been paid (if due), and no notice
      of
      cancellation or termination has been received with respect to any such policy.
      Such policies are sufficient for compliance with all Governmental Requirements
      pertaining to the business of the Borrower and all agreements to which the
      Borrower is a party; are valid, outstanding and enforceable policies; provide
      adequate insurance coverage for the assets and operations of the Borrower,
      and
      to the knowledge of Borrower, in at least such amounts and against at least
      such
      risks (but including in any event public liability) as are usually insured
      against in the same general area by companies engaged in the same or a similar
      business; will remain in full force and effect through the respective dates
      set
      forth in Schedule
      8.13;
      and
      will not in any way be affected by, or terminate or lapse by reason of, the
      transactions contemplated by this Agreement and the Loan Documents. The Borrower
      (and, to the Borrower’s knowledge, any prior owner of the Oil and Gas
      Properties) has not been refused any insurance with respect to its assets or
      operations, nor has it been limited below usual and customary policy limits,
      by
      an insurance carrier to which it has applied for any insurance or with which
      it
      has carried insurance during the last three years. The Administrative Agent
      and
      the Lenders have been named as additional insureds in respect of such liability
      insurance policies and the Administrative Agent has been named as loss payee
      with respect to property loss insurance.

     

    
      
        
        

      

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

     

    Section
      8.15  Subsidiaries.
      Except
      as set forth on Schedule
      8.15,
      the
      Borrower has no Subsidiaries.

     

    Section
      8.16  Location
      of Business and Offices.
      The
      Borrower’s jurisdiction of formation is Delaware; the name of the Borrower as
      listed in the public records of its jurisdiction of formation is PRC Williston
      LLC; and the organizational identification number of the Borrower in its
      jurisdiction of formation is DE4281692 (or, in each case, as set forth in a
      notice delivered to the Administrative Agent pursuant to Section
      9.01(n)
      in
      accordance with Section
      13.01).
      The
      Borrower’s principal place of business and chief executive offices are located
      at the address specified in Section
      13.01
      (or as
      set forth in a notice delivered pursuant to Section
      9.01(n)
      and
Section
      13.01(c)).
      Each
      Subsidiary’s jurisdiction of formation, name as listed in the public records of
      its jurisdiction of formation, formation identification number in its
      jurisdiction of formation, and the location of its principal place of business
      and chief executive office is stated on Schedule
      8.15
      (or as
      set forth in a notice delivered pursuant to Section
      9.01(n)).

     

    Section
      8.17  Properties;
      Titles, Etc.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    (e)  The
      Borrower and each Subsidiary, if any, owns, or is licensed to use, all
      trademarks, tradenames, copyrights, patents and other intellectual Property
      material to its business, and the use thereof by the Borrower and such
      Subsidiary does not infringe upon the rights of any other Person. The Borrower
      and its Subsidiaries either own or have valid licenses or other rights to use
      all databases, geological data, geophysical data, engineering data, seismic
      data, maps, interpretations and other technical information used or usable
      in
      the conduct of their businesses, 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.

     

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

     

    Section
      8.19  Gas
      Imbalances,
      Prepayments.
      Except
      as set forth on Schedule
      8.19,
      on a
      net basis there are no gas imbalances, take or pay or other prepayments that
      would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons
      produced from the Oil and Gas Properties at some future time without then or
      thereafter receiving full payment therefor. Except as set forth on Schedule
      8.19,
      no
      material gas imbalances exist with respect to any of the Borrower’s Oil and Gas
      Properties. Except as set forth in Schedule
      8.19,
      none of
      the Borrower’s Oil and Gas Properties are subject to any contractual or other
      arrangement whereby payment for production therefrom is to be deferred for
      a
      substantial period of time after the month in which such production is delivered
      (i.e., in the case of oil, not in excess of 60 days, and in the case of gas,
      not
      in excess of 90 days). Except as set forth on Schedule
      8.19,
      none of
      the Oil and Gas Properties of the Borrower is subject to a contractual or other
      arrangement for the sale of oil or gas production for a fixed price which cannot
      be canceled on 90 days (or less) notice or which contains commercial terms
      which
      are not customary in the industry. None of the Oil and Gas Properties of the
      Borrower is subject at present to any regulatory refund obligation and no facts
      exist which might cause the same to be imposed.

     

    
      
        
        

      

      
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    Section
      8.20  Marketing
      of Production.
      Except
      for contracts listed and in effect on the date hereof on Schedule
      8.20,
      and
      thereafter either disclosed in writing to the Administrative Agent or included
      in the most recently delivered Reserve Report (with respect to all of which
      contracts the Borrower represents that it or its 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 that are not cancelable on 60 days notice or less
      without penalty or detriment for the sale of production from the Borrower’s or
      its Subsidiaries’ Hydrocarbons (including, without limitation, calls on or other
      rights to purchase, production, whether or not the same are currently being
      exercised) that i.
      pertain
      to the sale of production at a fixed price and ii.
      have a
      maturity or expiry date of longer than six (6) months from the date hereof.
      All
      proceeds from the sale of the Borrower’s interests in Hydrocarbons from its Oil
      and Gas Properties will be paid in full to the Borrower by the purchaser thereof
      on a timely basis, and none of such proceeds are currently being held in
      suspense by such purchaser or any other Person. Except as set forth in
Schedule
      8.20,
      none of
      the Borrower’s Oil and Gas Properties are subject to any contractual or other
      arrangement whereby payment for production therefrom is to be deferred for
      a
      substantial period of time after the month in which such production is delivered
      (i.e., in the case of oil, not in excess of 60 days, and in the case of gas,
      not
      in excess of 90 days). 

     

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

     

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

     

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

     

    
      
        
        

      

      
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    Section
      8.24  Casualty
      Events.
      Since
      January 15, 2007, neither the business nor any Properties of the Borrower have
      been materially and adversely affected as a result of any fire, explosion,
      earthquake, flood, drought, windstorm, accident, strike or other labor
      disturbance, embargo, requisition or taking of Property or cancellation of
      contracts, permits or concessions by any domestic or foreign Governmental
      Authority, riot, activities or armed forces or acts of God or of any public
      enemy.

     

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

     

    Section
      8.26  Brokers.
      No
      Person other than Merrill Lynch & Co., Lyle B. Gallivan, Tahosa Land &
Royalty Company LLC, and Royal Oil, LLC is entitled to any brokerage fee or
      finders fee or similar fee or commission in connection with arranging the Loans
      contemplated by this Agreement and such amount shall not exceed $4,200,000
      plus
      1.25% of each advance made under this Agreement after the Effective
      Date.

     

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

     

    
      
        
        

      

      
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    Section
      8.28  Investments
      and Guaranties.
      The
      Borrower has not made any Investments in, advances to or guaranties of the
      obligations of any Person, except as reflected in the financial statements
      described in Section 1.01(a). 

     

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

     

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

     

    ARTICLE
      IX

    Affirmative
      Covenants

     

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

     

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

     

    (a)  Annual
      Financial Statements. 

     

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

     

    (ii)  As
      soon
      as available, but in any event in accordance with then applicable law and not
      later than 90 days after the end of each fiscal year of the Parent, the Parent’s
      consolidated balance sheet and related statements of operations, shareholder’s
      capital 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 certified
      by its Financial Officer as presenting fairly in all material respects the
      financial condition and results of operations of Parent and its Consolidated
      Subsidiaries on a consolidated basis in accordance with GAAP consistently
      applied.

     

    
      
        
        

      

      
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    (b)  Quarterly
      Financial Statements. 

     

    (i)  As
      soon
      as available, but in any event in accordance with then applicable law and not
      later than 45 days after the end of each of the first three fiscal quarters
      of
      each fiscal year of the Borrower, the Borrower’s consolidated balance sheet and
      related statements of operations, owners’ capital and cash flows as of the end
      of and for such fiscal quarter and the then elapsed portion of the fiscal year,
      and if applicable 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 its Financial Officer
      as presenting fairly in all material respects the financial condition and
      results of operations of the Borrower and its Consolidated Subsidiaries on
      a
      consolidated basis in accordance with GAAP consistently applied, subject to
      normal year-end audit adjustments and the absence of footnotes.

     

    (ii)  As
      soon
      as available, but in any event in accordance with then applicable law and not
      later than 45 days after the end of each of the first three fiscal quarters
      of
      each fiscal year of the Parent, the Parent’s consolidated balance sheet and
      related statements of operations, owners’ capital and cash flows as of the end
      of and for such fiscal quarter and the then elapsed portion of the fiscal year,
      and if applicable 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 its Financial Officer
      as presenting fairly in all material respects the financial condition and
      results of operations of the Parent 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
      9.01(a),
      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
      10.01,
      and
(iii)
      stating
      whether any change in GAAP or in the application thereof has occurred since
      the
      date of the audited financial statements referred to in Section
      8.04
      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 Consolidated Subsidiaries of the Borrower are not
      Consolidated Subsidiaries, then concurrently with any delivery of financial
      statements under Section
      9.01(a),
      a
      certificate of a Financial Officer setting forth consolidating spreadsheets
      that
      show all Consolidated Subsidiaries and the eliminating entries, in such form
      as
      would be presentable to the auditors of the Borrower.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (i)  Reports
      to Members.
      Promptly after the same become available, copies of all periodic and other
      reports and materials distributed by the Borrower to its members.

     

    (j)  Notices
      Under Material Instruments.
      Promptly after the furnishing thereof, copies of any financial statement, report
      or notice furnished to or by any Person pursuant to the terms of any preferred
      stock designation, indenture, loan or credit or other similar agreement, other
      than the Loan Documents and not otherwise required to be furnished to the
      Administrative Agent or the Arranger pursuant to any other provision of this
      Section
      9.01.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    (o)  Production
      Report and Lease Operating Statements.
      Within
      25 days after the end of each calendar month, (i)
      a report
      setting forth, for such calendar month, the volume of production and sales
      attributable to production (and the prices at which such sales were made and
      the
      revenues derived from such sales) for such calendar month from the Oil and
      Gas
      Properties, and setting forth the related ad valorem, severance and production
      taxes and lease operating expenses attributable thereto and incurred for such
      calendar month, and (ii)
      a
      drilling schedule for the next 180 days for all Oil and Gas Properties which
      the
      Borrower or any Subsidiary owns or controls or in which the Borrower or any
      Subsidiary participates. Each bi-weekly report shall set forth, for each day
      of
      that period, 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).

     

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

     

    (i)  on
      a
      monthly basis by the 25th of each month and, in addition, contemporaneously
      with
      the delivery by the Borrower of any Invoice Disbursement Request pertaining
      to a
      Development Project, a report through the end of the prior month setting forth
      as to each Development Project (each well on an individual well by well basis),
      the actual vs. estimated cost breakdown (for all activities, including dry
      hole
      and completion activities) for such Development Project; 

     

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

     

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

     

    
      
        
        

      

      
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    (q)  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
      of limited partnership, certificate of formation, by-laws, limited liability
      company agreement, any preferred stock designation or any other organic document
      of the Borrower or any Consolidated Subsidiary.

     

    (r)  ORRI
      Payments.
      Promptly, but in any event within 5 days after payment, Borrower shall give
      notice to the Arranger of all amounts paid to the Lenders in connection with
      any
      overriding royalty interest created under any ORRI Assignment.

     

    (s)  Board
      of Directors Materials.
      Promptly following any request therefore, such materials and minutes prepared
      for and distributed in connection with meetings of or actions taken by the
      members of the Borrower.

     

    (t)  Notices
      Relating to Acquisition.
      In the
      event that after the Effective Date: (i)
      the
      Borrower is required or elects to purchase any of the Acquisition Properties
      which had been excluded from, or return any of the Acquisition Properties which
      had been included in, the Acquisition Properties in accordance with the terms
      of
      the Acquisition Documents, (ii)
      the
      Borrower is required to honor any preferential purchase right in respect of
      any
      Acquisition Property which has not been waived, (iii)
      any
      matter being disputed in accordance with the terms of the Acquisition Documents
      is resolved or (iv)
      the
      Borrower and the seller(s) calculate and agree upon the "closing adjustment
      statement" or "post-closing adjustment statement" as contemplated by the
      Acquisition Documents, then, in each such case, the Borrower shall promptly
      give
      the Administrative Agent notice in reasonable detail of such
      circumstances.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    Section
      9.05  Performance
      of Obligations under Loan Documents.
      The
      Borrower will pay the Loans according to the reading, tenor and effect thereof,
      and the Borrower will, and will cause each Guarantor (if any) 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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    (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.

     

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

     

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

     

    (g)  within
      six (6) months of the Effective Date, cause a Phase I environmental study with
      respect to the Oil and Gas Properties of the Borrower and its Subsidiaries
      to be
      completed, with results in scope and substance that are satisfactory to the
      Administrative Agent.

     

    
      
        
        

      

      
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    Section
      9.07  Insurance.
      The
      Borrower will, and will cause each Subsidiary to, maintain, with financially
      sound and reputable insurance companies, insurance in such amounts and against
      such risks as are customarily maintained by companies engaged in the same or
      similar businesses operating in the same or similar locations but in any event
      it will maintain at a minimum the types of insurance and in such amounts as
      reflected on Schedule
      8.13.
      The
      loss payable clauses or provisions in said insurance policy or policies insuring
      any of the collateral for the Loans shall be endorsed in favor of and made
      payable to the Administrative Agent as its interests may appear and such
      policies shall name the Administrative Agent and the Lenders as “additional
      insureds” and provide that the insurer will endeavor to give at least 30 days
      prior notice of any cancellation to the Administrative Agent except in the
      case
      of a cancellation resulting from the failure to pay premiums in respect of
      such
      policy, in which event the insurer will endeavor to give at least 10 days prior
      notice of such cancellation.

     

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

     

    Section
      9.09  Compliance
      with Laws.
      The
      Borrower will, and will cause each 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
      9.10  Environmental
      Matters.

     

    (a)  The
      Borrower shall
      at
      its sole expense: (i) comply, and shall cause its Properties and operations
      and
      each Subsidiary and each Subsidiary’s Properties and operations to comply, with
      all applicable Environmental Laws, the breach of which could be reasonably
      expected to have a Material Adverse Effect; (ii) not dispose 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 Borrower’s or its Subsidiaries’ Properties or any other
      Property to the extent caused by the Borrower’s or any of its 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 its Subsidiaries’ Properties, which failure to obtain
      or file could reasonably be expected to have a Material Adverse Effect; (iv)
      promptly commence and diligently prosecute to completion, and shall cause each
      Subsidiary to promptly commence and diligently prosecute to completion, any
      assessment, evaluation, investigation, monitoring, containment, cleanup,
      removal, repair, restoration, remediation or other remedial obligations
      (collectively, the “Remedial
      Work”)
      in the
      event any Remedial Work is required or reasonably necessary under applicable
      Environmental Laws because of or in connection with the actual or suspected
      past, present or future disposal or other release of any oil, oil and gas waste,
      hazardous substance or solid waste on, under, about or from any of the
      Borrower’s or its 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 policies of environmental
      audit
      and compliance as may be necessary to continuously determine and assure that
      the
      Borrower’s and its Subsidiaries’ obligations under this Section 9.10(a) are
      timely and fully satisfied, which failure to establish and implement could
      reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
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    (b)  The
      Borrower will promptly, but in no event later than five days of the occurrence
      of a triggering event, notify the Administrative Agent and the Lenders in
      writing of any threatened action, investigation or inquiry by any Governmental
      Authority or any threatened demand or lawsuit by any landowner or other third
      party against the Borrower or its 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 $50,000, not fully covered by insurance, subject to
      normal deductibles.

     

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

     

    (d)  The
      Borrower will use reasonable efforts to cause the operator to comply with this
      Section 9.10, to the extent the Borrower is not the operator of any
      Property

     

    Section
      9.11  Further
      Assurances.

     

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

     

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

     

    Section
      9.12  Reserve
      Reports.

     

    (a)  Commencing
      as of July 1, 2007, on or before each February 15 and August 15 the Borrower
      shall furnish to the Administrative Agent and the Arranger a Reserve Report
      effective as the previous January 1st
      and July
      1st,
      as
      applicable. Each such Reserve Report shall be prepared by one or more Approved
      Petroleum Engineers.

     

    
      
        
        

      

      
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    (b)  With
      the
      delivery of each Reserve Report, the Borrower shall provide to the
      Administrative Agent and the Arranger a certificate from a Responsible Officer
      certifying that in all material respects: (i)
      the
      information contained in the Reserve Report and any other information delivered
      in connection therewith is true and correct, (ii)
      the
      Borrower or its Subsidiaries owns good and defensible title to the Oil and
      Gas
      Properties evaluated in such Reserve Report and such Properties are free of
      all
      Liens except for Liens permitted by Section
      10.03,
      (iii)
      except
      as set forth on an exhibit to the certificate, on a net basis there are no
      gas
      imbalances, take or pay or other prepayments in excess of the volume specified
      in Section
      8.19
      with
      respect to its Oil and Gas Properties evaluated in such Reserve Report which
      would require the Borrower or any 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 therefore, (iv)
      none of
      their Oil and Gas Properties have been sold since the date of the previous
      Reserve Report delivered except as set forth on an exhibit to the certificate,
      which certificate shall list all of its Oil and Gas Properties sold and in
      such
      detail as reasonably required by the Administrative Agent, (v)
      attached
      to the certificate is a list of all marketing agreements entered into subsequent
      to the later of the date hereof or the most recently delivered Reserve Report
      which the Borrower could reasonably be expected to have been obligated to list
      on Schedule
      8.20
      or
Schedule
      8.25
      had such
      agreement been in effect on the date hereof and (vi)
      all of
      the Oil and Gas Properties evaluated by such Reserve Report are Mortgaged
      Properties.
      

     

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

     

    Section
      9.13  Title
      Information.

     

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

     

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

     

    
      
        
        

      

      
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    Section
      9.14  Additional
      Collateral; Additional Guarantors.

     

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

     

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

     

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

     

    (d)  All
      of
      the issued and outstanding Equity Interests of the Borrower shall at all times
      be pledged to the Administrative Agent pursuant to the Guarantee and Pledge
      Agreement or other security agreements acceptable to the Administrative
      Agent.

     

    Section
      9.15  ERISA
      Compliance.
      The
      Borrower will promptly furnish and will cause the Subsidiaries and any ERISA
      Affiliate to promptly furnish to the Administrative Agent i.
      promptly
      after the filing thereof with the United States Secretary of Labor, the Internal
      Revenue Service or the PBGC, copies of each annual and other report with respect
      to each Plan or any trust created thereunder, ii.
      immediately upon becoming aware of the occurrence of any ERISA Event or of
      any
“prohibited transaction,” as described in section 406 of ERISA or in section
      4975 of the Code, in connection with any Plan or any trust created thereunder,
      a
      written notice signed by the President or the principal Financial Officer,
      the
      Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
      thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
      taking or proposes to take with respect thereto, and, when known, any action
      taken or proposed by the Internal Revenue Service, the Department of Labor
      or
      the PBGC with respect thereto, and iii.
      immediately upon receipt thereof, copies of any notice of the PBGC’s intention
      to terminate or to have a trustee appointed to administer any Plan. With respect
      to each Plan (other than a Multiemployer Plan), the Borrower will, and will
      cause each Subsidiary and ERISA Affiliate to, 1.
      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
2.
      pay, or
      cause to be paid, to the PBGC in a timely manner, without incurring any late
      payment or underpayment charge or penalty, all premiums required pursuant to
      sections 4006 and 4007 of ERISA.

     

    
      
        
        

      

      
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    Section
      9.16  Swap
      Agreements.
      The
      Borrower shall within five (5) Business Days of the Effective Date, and from
      time to time thereafter enter into Swap Agreements in respect of oil so that
      the
      notional volumes of all Swap Agreements, in the aggregate, are more than 75%
      of
      the reasonably anticipated projected production from Proved Developed Producing
      Reserves from the Borrower’s Oil and Gas Properties (net to the Borrower) for
      each month for the three years following the Effective Date.

     

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

     

    Section
      9.18  Overriding
      Royalty Interests.
      

     

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

     

    (b)  The
      overriding royalty interest in any Oil and Gas Property required to be conveyed
      shall equal four percent (4.00%) of 8/8ths (proportionately reduced to the
      undivided interest owned by the Borrower and any of its Subsidiaries therein)
      in
      each such Oil and Gas Property. If the Borrower raises $15,000,000 or more
      of
      new equity within six (6) months of the Effective Date, the overriding royalty
      interest in all Oil and Gas Property conveyed shall be permanently reduced
      to
      three and one-half percent (3.50%) of 8/8ths (proportionately reduced to the
      undivided interest owned by the Borrower and any of its Subsidiaries therein)
      in
      each such Oil and Gas Property. Borrower and Lenders shall execute such an
      assignment document (in form acceptable to the Lenders) reconveying such a
      one-half percentage (0.50%) of 8/8ths(proportionately reduced to the undivided
      interest owned by the Borrower and any of its Subsidiaries therein) overriding
      royalty to the Borrower. Such reconveyance shall be without any representations
      or warranties of any kind other than that the Lenders have not encumbered such
      interest. The overriding royalty shall be subject to the terms and conditions
      set forth in the form of the ORRI Assignment, and any other agreements currently
      in existence as of the time of the acquisition of such Properties and validly
      affecting the underlying leases. 

     

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

     

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

     

    
      
        
        

      

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

     

    Section
      9.19  Right
      of First Refusal.
      If at
      any time during the term of this Agreement, Borrower desires to develop any
      Development Project or other project for which there is insufficient funding
      available from Borrower’s equity capital, Borrower shall present to Arranger a
      financing request for such projects at least 30 days prior to the proposed
      closing date for such transaction, including, without limitation, all financial
      data that Borrower has developed with respect to such projects and such other
      documentation required under this Agreement with respect to a Development
      Project that is to be funded under this Agreement, and any other information
      which Arranger may reasonably request so as to enable Arranger to evaluate
      and
      determine whether Arranger shall offer to finance such proposed project through
      this Agreement or another facility agented by the Administrative Agent and
      with
      the Lenders as the lenders thereunder. Any such offer to finance a proposed
      project by Arranger shall be accepted by the Borrower so long as the terms
      of
      such offer i.
      are
      reasonable compared generally to financing then being obtained in the region
      for
      similar projects and ii.
      are not
      less favorable to the Borrower than financing proposals it has received from
      other third-parties relating to the proposed project.

     

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

     

    Section
      9.21  Members
      of Borrower; Observers.
      The
      Administrative Agent shall be entitled to have one or more observers (the
“Agent
      Observers”)
      attend
      any regular meeting of the Members of the Borrower. The Agent Observers shall
      not be entitled to vote on matters presented to or discussed by the Members
      of
      the Borrower at any such meeting. The Agent Observers shall be timely notified
      of the time and place of any such meeting and will be given written notice
      of
      all proposed actions to be taken by the Members of the Borrower at any such
      meeting as if the Agent Observers were members of the Members of the Borrower.
      Such notice shall describe in reasonable detail the nature and substance of
      the
      matters to be discussed and/or voted upon at any such meeting (or the proposed
      actions to be taken by written consent without a meeting). The Agent Observers
      shall have the right to receive all information provided to the members of
      the
      Members of the Borrower in anticipation of or at any such meeting, in addition
      to copies of the records of the proceedings or minutes of any such meeting,
      when
      provided to the members of the Members of the Borrower. The Borrower shall
      reimburse the Agent Observers for all reasonable and documented out-of-pocket
      costs and expenses incurred in connection with their participation in any such
      meeting. The Agent Observers shall also have the right to receive all
      information provided to each member of the Board of Directors of each Subsidiary
      (if any) of the Borrower (the “Other
      Boards”),
      in
      anticipation of or at all meetings thereof (whether regular or special and
      whether telephonic or otherwise), in addition to copies of the records of the
      proceedings or minutes of such meetings, when provided to the members of such
      Other Boards. The Borrower will also furnish or will cause to be furnished
      to
      Administrative Agent and its counsel a copy of each written consent without
      a
      meeting adopted by the Members of the Borrower or any of the Other Boards not
      later than five (5) days after it has been signed by the last signatory thereto.
      The Members of the Borrower shall hold a regularly scheduled meeting at least
      monthly during the period of six months following the Effective Date and at
      least quarterly thereafter. The Borrower shall cause an amendment to its
      organizational documents to effect this schedule if necessary.

     

    
      
        
        

      

      
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    Section
      9.22  Meetings
      with Operator; Observers.
      The
      Borrower shall schedule, and the Administrative Agent shall be entitled to
      have
      one or more observers (the “Operator
      Observers”)
      attend, Quarterly Planning Meetings. The Operator Observers shall be timely
      notified of the time and place of any such meeting and will be given written
      notice of all proposed agenda items. Such notice shall describe in reasonable
      detail the nature and substance of the matters to be discussed and/or voted
      upon
      at any such meeting. The Operator Observers shall have the right to receive
      all
      information provided to the Borrower in anticipation of or at any such meeting
      including, reserve reports, seismic information, authorizations for expenditure,
      well logs, unit plans and design documents. The Borrower shall reimburse the
      Operator Observers for all reasonable and documented out-of-pocket costs and
      expenses incurred in connection with their participation in any such
      meeting.

     

    Section
      9.23  Equity
      Raise. Within
      180 days of the Effective Date, Borrower shall have received an equity
      investment from Parent of at least $5,000,000 which Borrower will use to pay
      down Indebtedness or at Lender’s election, spend in furtherance of, and
      accordance with, the Development Plan. Parent shall have obtained such equity
      investment through an equity issuance or other capital investment from it’s
      Equity Interest owners. 

     

    ARTICLE
      X

    Negative
      Covenants

     

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

     

    Section
      10.01  Financial
      Covenants.
      As of
      June 30, 2007,

     

    (a)  Ratio
      of Total Debt to EBITDA.
      the
      Borrower will not permit the Borrower’s ratio of Total Debt as of the last day
      of any fiscal quarter to annualized EBITDA during the period set forth below
      to
      be greater than the ratio for such period set forth below. The foregoing ratio
      shall be annualized by multiplying EBITDA by four;

     

    
      	
              Period

               

            	
              Ratio

               

            
	
              June
                30, 2007 - December 31, 2007

            	
              6.00:1.00

               

            
	
              March
                31, 2008 - September 30, 2008

               

            	
              4.00:1.00

               

            
	
              September
                30, 2008 - December 31, 2008

               

            	
              3.00:1.00

               

            
	
              March
                31, 2008 and thereafter

               

            	
              2.00:1.00

               

            

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

       

    

    (b)  Ratio
      of EBITDA to Interest.
      the
      Borrower will not permit on the last day of the fiscal quarter set forth below,
      the Borrower’s ratio of EBITDA for the applicable fiscal quarter to Consolidated
      Interest Expense to be less than the ratio set forth below for the applicable
      quarter;

     

    
      	
              Fiscal
                Quarter Ending

               

            	
              Ratio

               

            
	
              June
                30, 2007 - December 31, 2007

            	
              1.50:1.00

               

            
	
              March
                31, 2008 - June 30, 2008

               

            	
              2.00:1.00

               

            
	
              September
                30, 2008 - December 31, 2008

               

            	
              3.00:1.00

               

            
	
              March
                31, 2009 and thereafter

               

            	
              2.00:1.00

               

            

    

     

    (c)  Current
      Ratio.
      the
      Borrower will not permit, as of the last day of any fiscal quarter, the
      Borrower’s ratio of (i)
      consolidated current assets (including any undrawn amounts that are committed
      under this Agreement that Borrower is permitted to draw but excluding non-cash
      assets under FAS 133) to (ii)
      consolidated current liabilities (excluding non-cash obligations under FAS
      133
      and outstanding amounts under this Agreement), to be less than 1.0:1.0;

     

    (d)  Reserve
      Ratios to Total Debt.
      the
      Borrower will not permit, as of the last day of any fiscal quarter, (i)
      its
      ratio of the Net Present Value of Proved Developed Producing Reserves, to Total
      Debt to be less than 1.00:1.00, and (ii)
      its
      ratio of the Net Present Value of Total Proved Reserves divided by Total Debt
      to
      be less than 2.00:1.00. The foregoing ratios shall be determined by reference
      to
      the most recent Reserve Report, based on pricing parameters determined by
      Arranger.

     

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

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

    Section
      10.03  Liens.
      Except
      as set forth on Schedule
      10.03,
      the
      Borrower will not, and will not permit any Subsidiary to, create, incur, assume
      or permit to exist any Lien on any of its Properties (now owned or hereafter
      acquired), except i.
      Liens
      securing the payment of any Indebtedness
      and
ii.
      Excepted
      Liens.

     

    Section
      10.04  Restricted
      Payments.
      The
      Borrower will not, and will not permit any of its Subsidiaries to, declare
      or
      make, or agree to pay or make, directly or indirectly, any Restricted Payment,
      return any capital to its members, or make any distribution of its Property
      to
      its Equity Interest holders.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    Section
      10.07  Limitation
      on Leases.
      Except
      as set forth on Schedule
      10.07,
      neither
      the 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), under leases or lease agreements which would cause
      the
      aggregate amount of all payments made by the Borrower and the Subsidiaries
      pursuant to all such leases or lease agreements, including, without limitation,
      any residual payments at the end of any lease, to exceed $50,000 in any period
      of twelve consecutive calendar months during the life of such leases without
      the
      approval of the Lenders.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    (e)  permit,
      or allow any ERISA Affiliate to permit, the actuarial present value of the
      benefit liabilities under any Plan maintained by the Borrower, 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 the Borrower or a
      Subsidiary or with respect to any ERISA Affiliate of the 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, (i)
      any
      Multiemployer Plan, or (ii)
      any
      other Plan that is subject to Title IV of ERISA under which the actuarial
      present value of the benefit liabilities under such Plan exceeds the current
      value of the assets (computed on a plan termination basis in accordance with
      Title IV of ERISA) of such Plan allocable to such benefit
      liabilities.

     

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

     

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

     

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

     

    Section
      10.11  Sale
      or Discount of Receivables.
      Except
      for receivables obtained by the Borrower or any 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 the Borrower nor
      any
      Subsidiary will discount or sell (with or without recourse) any of its notes
      receivable or accounts receivable.

     

    
      
        
        

      

      
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    Section
      10.12  Mergers,
      Etc.Neither
      the Borrower nor any Subsidiary will merge into or with or consolidate with
      any
      other Person, or sell, lease or otherwise dispose of (whether in one transaction
      or in a series of transactions) all or substantially all of its Property to
      any
      other Person. Except as approved by the Administrative Agent and the Lenders
      in
      writing, the Borrower shall not issue any additional Equity Interests in the
      Borrower.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    Section
      10.20  Gas
      Imbalances, Take-or-Pay or Other Prepayments.
      The
      Borrower will not allow gas imbalances, take-or-pay or other prepayments with
      respect to the Oil and Gas Properties of the Borrower or any Subsidiary that
      would require the Borrower or such Subsidiary to deliver Hydrocarbons at some
      future time without then or thereafter receiving full payment therefore to
      exceed 10,000 mcf of gas (on an mcf equivalent basis) in the
      aggregate.

     

    Section
      10.21  Swap
      Agreements.
      The
      Borrower will not, and will not permit any Subsidiary to, enter into any Swap
      Agreements with any Person other than i.
      Swap
      Agreements in respect of commodities 1.
      with an
      Approved Counterparty and 2.
      the
      notional volumes for which (when aggregated with other commodity Swap Agreements
      then in effect other than basis differential swaps on volumes already hedged
      pursuant to other Swap Agreements) are not in excess of, as of the date such
      Swap Agreement is executed, 85% of the reasonably anticipated projected
      production from Proved Developed Producing Reserves for each month during the
      period during which such Swap Agreement is in effect for each of crude oil
      and
      natural gas, calculated separately; and ii.
      Swap
      Agreements in respect of interest rates with an Approved Counterparty, as
      follows: 1.
      Swap
      Agreements effectively converting interest rates from fixed to floating, the
      notional amounts of which (when aggregated with all other Swap Agreements of
      the
      Borrower and its Subsidiaries then in effect effectively converting interest
      rates from fixed to floating) do not exceed 65% of the then outstanding
      principal amount of the Borrower’s Debt for borrowed money which bears interest
      at a fixed rate and 2.
      Swap
      Agreements effectively converting interest rates from floating to fixed, the
      notional amounts of which (when aggregated with all other Swap Agreements of
      the
      Borrower and its Subsidiaries then in effect effectively converting interest
      rates from floating to fixed) do not exceed 75% of the then outstanding
      principal amount of the Borrower’s Debt for borrowed money which bears interest
      at a floating rate. Other than as to a counterparty that is a Lender or an
      Affiliate of any of the Lenders, no Swap Agreement shall contain any
      requirement, agreement or covenant for the Borrower or any Subsidiary to post
      collateral or margin to secure their obligations under such Swap Agreement
      or to
      cover market exposures.

     

     

    
      
        
        

      

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

       

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

       

      Section 10.24  G&A
        Costs.
        Without
        the prior consent of the Lenders the Borrower shall not incur and shall not
        permit any Subsidiary to incur General and Administrative Costs on a quarterly
        basis in excess of $60,000.

       

      Section 10.25  Press
        Release.
        Without
        the prior consent of the Administrative Agent, which consent shall not be
        unreasonably withheld, neither the Borrower nor the Parent shall issue any
        press
        release or make any public announcement concerning this Agreement or the
        credit
        facility being provided in connection herewith. 

       

      Section 10.26  Consolidated
        Subsidiaries.
        Without
        the prior written consent of the Administrative Agent, the Borrower will
        not
        create or acquire any Subsidiary that is not a Consolidated Subsidiary.

       

      Section 10.27  Acquisition
        Documents.
        The
        Borrower will not, and will not permit any of its Subsidiaries to, amend,
        modify
        or supplement any of the Acquisition Documents if the effect thereof could
        reasonably be expected to have a Material Adverse Effect (and provided that
        the
        Borrower promptly furnishes to the Administrative Agent a copy of such
        amendment, modification or supplement).

       

      Section 10.28  AMI.
        The
        Borrower will not permit any of its Affiliates to acquire any Hydrocarbon
        Interests in the State of North Dakota. Borrower is the only Subsidiary of
        Parent that will own Hydrocarbon Interests in North Dakota and Parent will
        not
        own Hydrocarbon Interests in North Dakota.

       

      ARTICLE
        XI

      Events
        of Default; Remedies

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      (d)  the
        Borrower or any Subsidiary shall fail to observe or perform any covenant,
        condition or agreement contained in Section
        9.01(n),
        Section
        9.03,
        Section
        9.07,
        Section
        9.15,
        Section
        9.20
        or in
        Article X.

       

      (e)  the
        Parent, Borrower or any of its Subsidiaries shall fail to observe or perform
        any
        covenant, condition or agreement contained in this Agreement (other than
        those
        specified in Section
        11.01(a),
        Section
        11.01(b)
        or
Section
        11.01(d))
        or any
        other Loan Document, and such failure shall continue unremedied for a period
        of
        15 days (except with respect to Section
        9.02
        which
        shall only have a 5-day grace period) after the earlier to occur of (i)
        notice
        thereof from the Administrative Agent to the Borrower (which notice will
        be
        given at the request of any Lender) or (ii)
        a
        Responsible Officer of the Borrower or such Affiliate otherwise becoming
        aware
        of such default.

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

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

       

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

       

      (n)  a
        Change
        in Control shall occur.

       

      Section
        11.02  Remedies.

       

      (a)  In
        the
        case of an Event of Default other than one described in Section
        11.01(h),
        Section
        11.01(i)
        or
Section
        11.01(j),
        at any
        time thereafter during the continuance of such Event of Default, the
        Administrative Agent may, and at the request of the Lenders, shall, by notice
        to
        the Borrower, declare the Notes and the Loans then outstanding to be due
        and
        payable in whole (or in part, in which case any principal not so declared
        to be
        due and payable may thereafter be declared to be due and payable), and thereupon
        the principal of the Loans so declared to be due and payable, together with
        accrued interest thereon and all fees and other obligations of the Borrower
        and
        the Guarantors accrued hereunder and under

       

      
        
          
          

        

        
          65

          
            

          

        

        
          
          

        

         

        the
          Notes
          and the other Loan Documents, shall become due and payable immediately,
          without
          presentment, demand, protest, notice of intent to accelerate, notice of
          acceleration or other notice of any kind, all of which are hereby waived
          by the
          Borrower and each Guarantor; and in case of an Event of Default described
          in
Section
          11.01(h),
          Section
          11.01(i)
          or
Section
          11.01(j),
          the
          Notes and the principal of the Loans then outstanding, together with accrued
          interest thereon and all fees and the other obligations of the Borrower
          and the
          Guarantors accrued hereunder and under the Notes and the other Loan Documents,
          shall automatically become due and payable, without presentment, demand,
          protest
          or other notice of any kind, all of which are hereby waived by the Borrower
          and
          each Guarantor.

      

       

      (b)  In
        the
        case of the occurrence and continuance of an Event of Default, (i) the
        Administrative Agent is authorized to complete the Letters-in-Lieu and deliver
        same, and the Administrative Agent and the Lenders will have all other rights
        and remedies available at law and equity and (ii) Administrative Agent shall
        have the right to direct the operations of any contract operator of Borrower’s
        Oil and Gas Properties under any contract operating agreement between Borrower
        and any Person.

       

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

       

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

       

      ARTICLE
        XII

      The
        Administrative Agent

       

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

       

      
        
          
          

        

        
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      Section
        12.02  Duties
        and Obligations of Administrative Agent.
        The
        Administrative Agent shall not have any duties or obligations except those
        expressly set forth in the Loan Documents. Without limiting the generality
        of
        the foregoing, i.
        the
        Administrative Agent shall not be subject to any fiduciary or other implied
        duties, regardless of whether a Default has occurred and is continuing,
ii.
        the
        Administrative Agent shall not have any duty to take any discretionary action
        or
        exercise any discretionary powers, except as provided in Section
        12.03,
        and
iii.
        except
        as expressly set forth herein, the Administrative Agent shall not have any
        duty
        to disclose, and shall not be liable for the failure to disclose, any
        information relating to the Borrower or any of its Subsidiaries that is
        communicated to or obtained by the entity serving as Administrative Agent
        or any
        of its Affiliates in any capacity. The Administrative Agent shall be deemed
        not
        to have knowledge of any Default unless and until written notice thereof
        is
        given to the Administrative Agent by the Borrower or a Lender, and shall
        not be
        responsible for or have any duty to ascertain or inquire into 1.
        any
        statement, warranty or representation made in or in connection with this
        Agreement or any other Loan Document, 2.
        the
        contents of any certificate, report or other document delivered hereunder
        or
        under any other Loan Document or in connection herewith or therewith,
3.
        the
        performance or observance of any of the covenants, agreements or other terms
        or
        conditions set forth herein or in any other Loan Document, 4.
        the
        validity, enforceability, effectiveness or genuineness of this Agreement,
        any
        other Loan Document or any other agreement, instrument or document, 5.
        the
        satisfaction of any condition set forth in Article VII
        or
        elsewhere herein, other than to confirm receipt of items expressly required
        to
        be delivered to the Administrative Agent or as to those conditions precedent
        expressly required to be to the Administrative Agent’s satisfaction,
6.
        the
        existence, value, perfection or priority of any collateral security or the
        financial or other condition of the Borrower and its Subsidiaries or any
        other
        obligor or guarantor, or 7.
        any
        failure by the Borrower or any other Person (other than itself) to perform
        any
        of its obligations hereunder or under any other Loan Document or the performance
        or observance of any covenants, agreements or other terms or conditions set
        forth herein or therein. 

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      
        
          
          

        

        
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      ARTICLE
        XIII

      Miscellaneous

       

      Section
        13.01  Notices.
        

       

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

       

      (i)  if
        to the
        Borrower, to it at PRC Williston LLC, 5100 Westheimer Street, Suite 200,
        Houston, Texas 77056, Attention: Wayne P. Hall, Chief Executive Officer
        (Telephone No. (713) 968-9282; Telecopy No. (713) 968-9283);

       

      (ii)  if
        to the
        Administrative Agent, to it at D.B. Zwirn Special Opportunities Fund, L.P.,
        745
        5th Avenue, 18th Floor, New York, NY 10151, Attention: Scott McMurtry (Telecopy
        No. (646) 344-4676);

       

      (iii)  if
        to the
        Arranger, to it at Petrobridge Investment Management LLC, 1600 Smith Street,
        Suite 4250, Houston, TX 77002, Attention of Michael R. Keener (Telephone
        No.
        (713) 498-3860; Telecopy No. (713) 490-3867);

       

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

       

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

       

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

       

      Section
        13.02  Waivers;
        Amendments. 

       

      (a)  No
        failure on the part of the Administrative Agent, any Lender, or the Arranger
        to
        exercise and no delay in exercising, and no course of dealing with respect
        to,
        any right, power or privilege, or any abandonment or discontinuance of steps
        to
        enforce such right, power or privilege, under any of the Loan Documents shall
        operate as a waiver thereof, nor shall any single or partial exercise of
        any
        right, power or privilege under any of the Loan Documents preclude any other
        or
        further exercise thereof or the exercise of any other right, power or privilege.
        The rights and remedies of the Administrative Agent and the Lenders hereunder
        and under the other Loan Documents are cumulative and are not

       

      
        
          
          

        

        
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        exclusive
          of any rights or remedies that they would otherwise have. No waiver of
          any
          provision of this Agreement or any other Loan Document or consent to any
          departure by the Borrower therefrom shall in any event be effective unless
          the
          same shall be permitted by Section
          13.02(b),
          and
          then such waiver or consent shall be effective only in the specific instance
          and
          for the purpose for which given. Without limiting the generality of the
          foregoing, the making of a Loan shall not be construed as a waiver of any
          Default, regardless of whether the Administrative Agent or any Lenders
          may have
          had notice or knowledge of such Default at the time.

      

       

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

       

      Section
        13.03  Expenses,
        Indemnity; Damage Waiver. 

       

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

       

      (b)  The
        Borrower shall indemnify the Administrative Agent, the Arranger, and each
        Lender, and each Related Party of any of the foregoing persons (each such
        person
        being called an “Indemnitee”)
        against, and hold each Indemnitee harmless from, any and all losses, claims,
        damages, liabilities and related expenses, including the reasonable 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 

       

      
        
          
          

        

        
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        other
          Loan Document of their respective obligations hereunder or thereunder or
          the
          consummation of the transactions contemplated hereby or by any other Loan
          Document, (ii)
          the
          failure of the Borrower or any Subsidiary to comply with the terms of any
          Loan
          Document, including this Agreement, or with any Governmental Requirement,
          (iii)
          any
          inaccuracy of any representation or any breach of any warranty or covenant
          of
          the Borrower or any Guarantor set forth in any of the Loan Documents or
          any
          instruments, documents or certifications delivered in connection therewith,
          (iv)
          any Loan
          or the use of the proceeds therefrom, (v)
          any
          other aspect of the Loan Documents, (vi)
          the
          operations of the business of the Borrower and its Subsidiaries by the
          Borrower
          and its Subsidiaries, (vii)
          any
          assertion that the Lenders were not entitled to receive the proceeds received
          pursuant to the Security Instruments, (viii)
          any
          Environmental Law applicable to the Borrower or any Consolidated Subsidiary
          or
          any of their Properties, including without limitation, the presence, generation,
          storage, release, threatened release, use, transport, disposal, arrangement
          of
          disposal or treatment of oil, oil and gas wastes, solid wastes or hazardous
          substances on any of their Properties, (ix)
          the
          breach or non-compliance by the Borrower or any Subsidiary with any
          Environmental Law applicable to the Borrower or any Subsidiary, (x)
          the past
          ownership by the Borrower or any Subsidiary of any of their Properties
          or past
          activity on any of their Properties which, though lawful and fully permissible
          at the time, could result in present liability, (xi)
          the
          presence, use, release, storage, treatment, disposal, generation, threatened
          release, transport, arrangement for transport or arrangement for disposal
          of
          oil, oil and gas wastes, solid wastes or hazardous substances on or at
          any of
          the Properties owned or operated by the Borrower or any Subsidiary or any
          actual
          or alleged presence or release of hazardous materials on or from any Property
          owned or operated by the Borrower or any of its Subsidiaries, (xii)
          any
          environmental liability related in any way to the Borrower or any of its
          Subsidiaries, or (xiii)
          any
          other environmental, health or safety condition in connection with the
          Loan
          Documents, or (xiv)
          any
          actual or prospective claim, litigation, investigation or proceeding relating
          to
          any of the foregoing, whether based on contract, tort or any other theory
          and
          regardless of whether any Indemnitee is a party thereto, and such indemnity
          shall extend to each Indemnitee notwithstanding the sole or concurrent
          negligence of every kind or character whatsoever, whether active or passive,
          whether an affirmative act or an omission, including without limitation,
          all
          types of negligent conduct identified in the Restatement (Second) of Torts
          of
          one or more of the Indemnitees or by reason of strict liability imposed
          without
          fault on any one or more of the Indemnitees; provided that such indemnity
          shall
          not, as to any Indemnitee, be available to the extent that such losses,
          claims,
          damages, liabilities or related expenses are determined by a court of competent
          jurisdiction by final and nonappealable judgment to have resulted from
          the gross
          negligence or willful misconduct of such Indemnitee. Provided,
          however, Administrative Agent will endeavor to notify Borrower of any matter
          in
          which Administrative Agent or Lenders will seek indemnification for under
          this
          Agreement, but failure to notify Borrower in a timely manner will not prejudice
          Administrative Agent’s or any Lender’s rights to indemnification under this
          Agreement in any way.

      

       

      
        
          
          

        

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

       

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

       

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

       

      Section
        13.04  Successors
        and Assigns.

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      (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
        $10,000; and

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      
        
          
          

        

        
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      Section
        13.05  Survival;
        Revival; Reinstatement.

       

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

       

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

       

      Section
        13.06  Counterparts;
        Integration; Effectiveness.
        

       

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

       

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

       

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

       

      
        
          
          

        

        
          76

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      Section
        13.09  Governing
        Law; Jurisdiction; Consent to Service of Process.

       

      (a)  This
        Agreement and the Notes shall be governed by, and construed in accordance
        with,
        the laws of the State Of New York except to the extent that United States
        federal law permits any Lender to contract for, charge, receive, reserve
        or take
        interest at the rate allowed by the laws of the state where such Lender is
        located.

       

      (b)  Any
        legal
        action or proceeding with respect to the Loan Documents shall be brought
        in the
        courts of the State of New York or of the United States of America located
        in
        the Borough of Manhattan, New York, 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.

       

      
        
          
          

        

        
          77

          
            

          

        

        
          
          

        

      

       

      (c)  Each
        party hereby (i)
        irrevocably and unconditionally waives, to the fullest extent permitted by
        law,
        trial by jury in any legal action or proceeding relating to this Agreement
        or
        any other Loan Document and for any counterclaim therein; (ii)
        irrevocably waives, to the maximum extent not prohibited by law, any right
        it
        may have to claim or recover in any such litigation any special, exemplary,
        punitive or consequential damages, or damages other than, or in addition
        to,
        actual damages; (iii)
        certifies that no party hereto nor any representative or agent of counsel
        for
        any party hereto has represented, expressly or otherwise, or implied that
        such
        party would not, in the event of litigation, seek to enforce the foregoing
        waivers, and (iv)
        acknowledges that it has been induced to enter into this Agreement, the Loan
        Documents and the transactions contemplated hereby and thereby by, among
        other
        things, the mutual waivers and certifications contained in this Section
13.09.

       

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

       

      Section
        13.11  Confidentiality.
        Each of
        the Administrative Agent and the Lender agrees to maintain the confidentiality
        of the Information (as defined below), except that Information may be disclosed
        i.
        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), ii.
        to the
        extent requested by any regulatory authority, iii.
        to the
        extent required by applicable laws or regulations or by any subpoena or similar
        legal process, iv.
        to any
        other party to this Agreement or any other Loan Document, v.
        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,
        vi.
        subject
        to an agreement containing provisions substantially the same as those of
        this
Section
        13.11,
        to
1.
        any
        assignee of or Participant in, or any prospective assignee of or Participant
        in,
        any of its rights or obligations under this Agreement or 2.
        any
        actual or prospective counterparty (or its advisors) to any Swap Agreement
        relating to the Borrower and its obligations, vii.
        with the
        consent of the Borrower or viii.
        to the
        extent such Information 1.
        becomes
        publicly available other than as a result of a breach of this Section
        13.11
        or
2.
        becomes
        available to the Administrative Agent or any Lender on a non-confidential
        basis
        from a source other than the Borrower. For the purposes of this Section
        13.11,
        “Information”
means
        all information received from the Borrower or any Subsidiary relating to
        the
        Borrower or any Subsidiary and their businesses, other than any such information
        that is available to the Administrative Agent or any Lender on a
        non-confidential basis prior to disclosure by the Borrower or a Subsidiary;
        provided
        that, in
        the case of information received from the Borrower or any Subsidiary after
        the
        date hereof, such information is clearly identified at the time of delivery
        as
        confidential. Any Person required to maintain the confidentiality of Information
        as provided in this Section
        13.11
        shall be
        considered to have complied with its obligation to do so if such Person has
        exercised the same degree of care to maintain the confidentiality of such
        Information as such Person would accord to its own confidential information.
        

       

      
        
          
          

        

        
          78

          
            

          

        

        
          
          

        

      

       

      Section
        13.12  Interest
        Rate
        Limitation.
        It is
        the intention of the parties hereto that each Lender shall conform strictly
        to
        usury laws applicable to it. Accordingly, if the transactions contemplated
        hereby would be usurious as to any Lender under laws applicable to it (including
        the laws of the United States of America the State of New York and
        the

      
        State
          of
          Delaware or any other jurisdiction whose laws may be mandatorily applicable
          to
          such Lender notwithstanding the other provisions of this Agreement), then,
          in
          that event, notwithstanding anything to the contrary in any of the Loan
          Documents or any agreement entered into in connection with or as security
          for
          the Notes, it is agreed as follows: 1.
          the
          aggregate of all consideration which constitutes interest under law applicable
          to any Lender that is contracted for, taken, reserved, charged or received
          by
          such Lender under any of the Loan Documents or agreements or otherwise
          in
          connection with the Notes shall under no circumstances exceed the maximum
          amount
          allowed by such applicable law, and any excess shall be canceled automatically
          and if theretofore paid shall be credited by such Lender on the principal
          amount
          of the Indebtedness (or, to the extent that the principal amount of the
          Indebtedness shall have been or would thereby be paid in full, refunded
          by such
          Lender to the Borrower); and 2.
          in the
          event that the maturity of the Notes is accelerated by reason of an election
          of
          the holder thereof resulting from any Event of Default under this Agreement
          or
          otherwise, or in the event of any required or permitted prepayment, then
          such
          consideration that constitutes interest under law applicable to any Lender
          may
          never include more than the maximum amount allowed by such applicable law,
          and
          excess interest, if any, provided for in this Agreement or otherwise shall
          be
          canceled automatically by such Lender as of the date of such acceleration
          or
          prepayment and, if theretofore paid, shall be credited by such Lender on
          the
          principal amount of the Indebtedness (or, to the extent that the principal
          amount of the Indebtedness shall have been or would thereby be paid in
          full,
          refunded by such Lender to the Borrower). All sums paid or agreed to be
          paid to
          any Lender for the use, forbearance or detention of sums due hereunder
          shall, to
          the extent permitted by law applicable to such Lender, be amortized, prorated,
          allocated and spread throughout the stated term of the Loans evidenced
          by the
          Notes until payment in full so that the rate or amount of interest on account
          of
          any Loans hereunder does not exceed the maximum amount allowed by such
          applicable law. If at any time and from time to time 1.
          the
          amount of interest payable to any Lender on any date shall be computed
          at the
          Highest Lawful Rate applicable to such Lender pursuant to this Section
          13.12
          and
2.
          in
          respect of any subsequent interest computation period the amount of interest
          otherwise payable to such Lender would be less than the amount of interest
          payable to such Lender computed at the Highest Lawful Rate applicable to
          such
          Lender, then the amount of interest payable to such Lender in respect of
          such
          subsequent interest computation period shall continue to be computed at
          the
          Highest Lawful Rate applicable to such Lender until the total amount of
          interest
          payable to such Lender shall equal the total amount of interest which would
          have
          been payable to such Lender if the total amount of interest had been computed
          without giving effect to this Section
          13.12.

         

        Section
          13.13  Exculpation
          Provisions. Each
          of
          the parties hereto specifically agrees that it has a duty to read this
          Agreement
          and the other Loan Documents and agrees that it is charged with notice
          and
          knowledge of the terms of this Agreement and the other Loan Documents;
          that it
          has in fact read this Agreement and is fully informed and has full notice
          and
          knowledge of the terms, conditions and effects of this Agreement; that
          it has
          been represented by independent legal counsel of its choice throughout
          the
          negotiations preceding its execution of this Agreement and the other Loan
          Documents; and has received the advice of its attorney in entering into
          this
          Agreement and the other Loan Documents; and that it recognizes that certain
          of
          the terms of this Agreement and the other Loan Documents result in one
          party
          assuming the liability inherent in some aspects of the Transaction and
          relieving
          the other party of its responsibility for such liability. Each party hereto
          agrees and covenants that it will not contest the validity or enforceability
          of
          any exculpatory provision of this Agreement and the other Loan Documents
          on the
          basis that the party had no notice or knowledge of such provision or that
          the
          provision is not “conspicuous.”

      

       

      
        
          
          

        

        
          79

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      Section 
        13.16  Securitization.
        The
        Borrower hereby acknowledges that the Lenders and their Affiliates may sell
        or
        securitize the Loans (a “Securitization”)
        through the pledge of the Loans as collateral security for loans to the Lenders
        or their Affiliates or through the sale of the Loans or the issuance of direct
        or indirect interests in the Loans, which loans to the Lenders or their
        Affiliates or direct or indirect interests will be rated by Moody’s, S&P or
        one or more other rating agencies (the “Rating
        Agencies”).
        The
        Borrower shall cooperate with the Lenders and their Affiliates to effect the
        Securitization including, without limitation, by i.
        amending
        this Agreement and the other Loan Documents, and executing such additional
        documents, as reasonably requested by the Lenders in connection with the
        Securitization, provided that 1.
        any such
        amendment or additional documentation does not impose material additional
        costs
        on the Borrower and 2.
        any such
        amendment or additional documentation does not materially adversely affect
        the
        rights, or materially increase the obligations, of the Borrower under the
        Loan
        Documents or change or affect in a manner adverse to the Borrower the financial
        terms of the Loans, ii.
        providing such information as may be reasonably requested by the Lenders
        in
        connection with the rating of the Loans or the Securitization, and iii.
        providing in connection with any rating of the Loans a certificate 1.
        agreeing
        to indemnify the Lenders and their Affiliates, any of the Rating Agencies,
        or
        any party providing credit support or otherwise participating in the
        Securitization (collectively, the “Securitization
        Parties”)
        for
        any losses, claims, damages or liabilities (the “Liabilities”)
        to
        which the Lenders, their Affiliates or such Securitization Parties may become
        subject insofar as the Liabilities arise out of or are based upon any untrue
        statement or alleged untrue statement of any material fact by Borrower or
        any
        Affiliate of Borrower contained in any Loan

       

      
        
          
          

        

        
          80

          
            

          

        

        
          
          

        

         

        Document
          or in any writing delivered by or on behalf of the Borrower or any Affiliate
          of
          the Borrower to the Lenders in connection with any Loan Document or arise
          out of
          or are based upon the omission or alleged omission by Borrower or any Affiliate
          of Borrower to state therein a material fact required to be stated therein,
          or
          necessary in order to make the statements therein, in light of the circumstances
          under which they were made, not misleading, and such indemnity shall survive
          any
          transfer by the Lenders or their successors or assigns of the Loans and
          2.
          agreeing
          to reimburse the Lenders and their Affiliates for any legal or other expenses
          reasonably incurred by such Persons in connection with defending the
          Liabilities.

      

       

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

       

       

       

      [SIGNATURES
        BEGIN NEXT PAGE]

       

       

       

      
        
          
          

        

        
          81

          
            

          

        

        
          
          

        

      

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

       

      
        	THE BORROWER:	PRC WILLISTON
                LLC
	 	
                 

                 

                By: /s/
                  Wayne P.
                  Hall                         

                Name:Wayne
                  P. Hall

                Title:Chief
                  Executive Officer

              

      

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          82

          
            

          

        

        
          
          

        

      

       

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

                
	 	
                   

                  
                    By:
                       D.B.
                      Zwirn Partners, LLC,

                    
                      its
                        general partner

                       

                       

                      By:
/s/
                        illegible                                       

                      Name:________________________

                      Title:_________________________

                       

                       

                      Address:  
745
                        5th Avenue, 18th Floor

                      New
                        York, New York  10151

                      Attention:
                        Scott McMurtry

                      Telecopy:
                        (646)
                        344-4676

                    

                  

                

        

         

         

         

         

         

         

        
          
            
            

          

          
            83

            
              

            

          

          
            
            

          

           

          
            
              
                	
                        LENDER:

                      	
                        DRAWBRIDGE
                          SPECIAL OPPORTUNITIES FUND LP

                      
	 	
                         

                        
                          By:  Drawbridge
                            Special Opportunities GP LLC,

                          
                            its
                              general partner

                             

                             

                            By:
/s/
                              illegible                                       

                            Name:________________________

                            Title:_________________________

                             

                             

                            Address:  
                              1345 Avenue of the Americas

                            46th
                              Floor

                            New
                              York, New York  10105

                            Attention:
                              Constantine M.
                              Dakolias,

                            Chief
                              Credit Officer

                            Telecopy:
                              (212)
                              202-3685

                          

                        

                      

              

               

            

          

           

           

           

           

          
            
              
              

            

            
              84

              
                

              

            

            
              
              

            

          

        

      

      
         

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

                  
	 	
                     

                    
                      By:
                         D.B.
                        Zwirn Partners, LLC,

                      
                        its
                          general partner

                         

                         

                        By:
/s/
                          illegible                                       

                        Name:________________________

                        Title:_________________________

                         

                         

                        Address:  
745
                          5th Avenue, 18th Floor

                        New
                          York, New York  10151

                        Attention:
                          Scott McMurtry

                        Telecopy:
                          (646)
                          344-4676

                      

                    

                  

          

           

        

      

       

       

       

       

      
        
          
          

        

        
          85

          
            

          

        

        
          
          

        

      

      ANNEX
        I

      LIST
        OF MAXIMUM COMMITMENT AMOUNTS

       

      
        	
                Name
                  of Lender

              	
                Applicable
                  Percentage

              	
                Commitment

              
	
                D.B.
                  Zwirn Special Opportunities Fund, L.P.

              	
                50.00%

              	
                $37,500,000

              
	
                Drawbridge
                  Special Opportunities Fund LP

              	
                50.00%

              	
                $37,500,000

              
	
                TOTAL

              	
                100.00%

              	
                $75,000,000

              

      

       

       

       

       

       

      
        
          
          

        

        
          Annex
            I

          
            

          

        

        
          
          

        

      

      
EXHIBIT
        A

      FORM
        OF NOTE

       

      
        	$[                      ]	
                February
                  __,
                  2007

              

      

       

      FOR
        VALUE
        RECEIVED, PRC Williston LLC, a Delaware
        limited liability company (the
        “Borrower”),
        hereby promises to pay to the order of [          ]
        (the
“Lender”),
        at
        the principal office of D.B. Zwirn Special Opportunities Fund, L.P. (the
        “Administrative
        Agent”),
        at
        1251 Avenue of the Americas, Suite 1600, New York, NY 10020, the principal
        sum
        of [            ]
        MILLION
        and NO/100 Dollars ($[        .00])
        (or
        such lesser amount as shall equal the aggregate unpaid principal amount of
        the
        Loans made by the Lender to the Borrower under the Credit Agreement as
        hereinafter defined), 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
        each 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 Credit
        Agreement.

       

      The
        date
        and amount of each Loan made by the Lender to the Borrower, 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 the Lender’s or the Borrower’s rights or obligations
        in respect of such Loans or affect the validity of such transfer by the Lender
        of this Note.

       

      This
        Note
        is one of the Notes referred to in the Credit Agreement dated as of February
        ____, 2007 among the Borrower, the Administrative Agent, and the lenders
        signatory thereto (including the Lender), and evidences Loans made by the
        Lender
        thereunder (such Credit Agreement as the same may be amended, supplemented
        or
        restated from time to time, the “Credit
        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 Credit Agreement and is entitled to the benefits
        provided for in the Credit Agreement and the other Loan Documents. The Credit
        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.

       

      The
        ownership of an interest in this Note shall be registered on a record of
        ownership maintained by the Lender or its agent. Notwithstanding anything
        else
        in this Note to the contrary, the right to the principal of, and stated interest
        on, this Note may be transferred only if the transfer is registered on such
        record of ownership and the transferee is identified as the owner of an interest
        in the obligation. The Lender or its agent shall be entitled to treat the
        registered holder of this Note (as recorded on such record of ownership)
        as the
        owner in fact thereof for all purposes and shall not be bound to recognize
        any
        equitable or other claim to or interest in this Note on the part of any other
        person or entity.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

       

       

      
        	 	
                PRC WILLISTON LLC

                 

                 

                By:___________________________________

                Name:

                Title:

              

      

       

       

      

 

      
        
          
          

        

        
          Exhibit
            A

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        B-1

      FORM
        OF INITIAL FUNDING DISBURSEMENT REQUEST

       

      February
        __, 2007

       

      PRC
        Williston LLC, a Delaware limited liability company (the “Borrower”),
        pursuant to Section
        2.02(a)
        of the
        Credit Agreement dated as of February ____, 2007 (together with all amendments,
        restatements, supplements or other modifications thereto, the “Credit
        Agreement”)
        among
        the Borrower, Drawbridge Special Opportunities Fund L.P, as Administrative
        Agent
        and the lenders (the “Lenders”)
        that
        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 Borrowing is $[_________];

       

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

       

      (iii)   Location
        and number of the Borrower’s account to which funds are to be disbursed, which
        shall comply with the requirements of Section
        2.02
        of the
        Credit Agreement, is as follows:

       

      [______________________]

      [______________________]

      [______________________]

      [______________________]

      [______________________]

       

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

       

      
        
          	 	
                  PRC WILLISTON LLC

                   

                   

                  By:___________________________________

                  Name:

                  Title:

                

        

         

        
          
            
            

          

          
            Exhibit
              B-1

            
              

            

          

          
            
            

          

        

      

      EXHIBIT
        B-2

       

      FORM
        OF SUBSEQUENT COMMITMENT INCREASE REQUEST

      
      

      Pursuant
        to the Credit Agreement dated as of February [__], 2007 (as amended, restated,
        supplemented or otherwise modified from time to time, the “Credit Agreement”)
        between PRC Williston LLC, a Delaware limited liability company, as the Borrower
        (the “Borrower”), D.B. Zwirn Special Opportunities Fund, L.P., as Administrative
        Agent and the Lenders named therein, the Borrower hereby requests an advance
        in
        the amount of $_____________ and on the date(s) set forth in the approved
        relevant Invoice Disbursement Request(s) pertaining to this Subsequent
        Commitment Increase Request. [The
        Development Project or acquisition] for which the advance is requested is
        _________________________. Attached hereto is the information required to
        be
        provided with this request pursuant to the terms of the Credit Agreement,
        including the AFE(s) for the above referenced Development
        Project.]
        or
[The
        acquisition for which the advance is required relates to the properties to
        be
        acquired from ____________ pursuant to the Purchase and Sale Agreement between
        the Borrower and _______________, dated ____________. Attached hereto is
        the
        information required to be provided with this request pursuant to the terms
        of
        the Credit Agreement.]

       

      All
        capitalized terms not otherwise defined herein shall have the meanings specified
        in the Credit Agreement. The undersigned, being the Responsible Officer of
        the
        Borrower, DOES HEREBY CERTIFY to the Lenders and the Administrative Agent,
        that:

       

      1.    As
        of the
        date of this Subsequent Commitment Increase Disbursement Request, and as
        of the
        date of the Subsequent Commitment Increase, each representation and warranty
        contained in the Credit Agreement and the Security Instruments (excluding
        any
        representations and warranties that expressly refer to a different date)
        is and
        will be true and correct.

       

      2.    As
        of the
        date of this Subsequent Commitment Increase Disbursement Request and as of
        the
        date of the Subsequent Commitment Increase, no Default or Event of Default
        has
        occurred and is continuing.

       

      3.    There
        has
        occurred no event, act or condition which has had or could have a Material
        Adverse Effect.

       

      
        
          	 	
                  PRC WILLISTON LLC

                   

                   

                  By:___________________________________

                  Name:

                  Title:

                

        

         

        
          
            
            

          

          
            Exhibit
              B-2

            
              

            

          

          
            
            

          

        

      

      EXHIBIT
        B-3

       

      FORM
        OF INVOICE DISBURSEMENT REQUEST

       

      Pursuant
        to the Credit Agreement dated as of February [__], 2007 (as amended, restated,
        supplemented or otherwise modified from time to time, the “Credit Agreement”)
        among PRC Williston LLC, a Delaware limited liability company (the “Borrower”),
        D.B. Zwirn Special Opportunities Fund, L.P., as Administrative Agent and
        the
        Lenders named therein, the Borrower, hereby requests an advance relating
        to the
        approved Subsequent Commitment Increase Request dated __________________
        on the
        date and in the amount as follows:

       

      $___________________________
        under the Promissory Note

       

      Requested
        funding date: ______________________.

       

      [Attached
        are invoices for which the advance will be used to pay.]
        or
[Attached
        is a certificate of Borrower indicating that the conditions to closing under
        the
        Purchase and Sale Agreement between the Borrower and ___________, dated
        ___________ have been satisfied and Borrower anticipates closing the transaction
        contemplated in such Purchase and Sale Agreement.]

       

      All
        capitalized terms not otherwise defined herein shall have the meanings specified
        in the Credit Agreement. The undersigned, being the Responsible Officer of
        the
        Borrower, DOES HEREBY CERTIFY to the Lenders and the Administrative Agent,
        that:

       

      1.    As
        of the
        date of this Invoice Disbursement Request, and as of the date of the Subsequent
        Commitment Increase, each representation and warranty contained in the Credit
        Agreement and the Security Instruments (excluding any representations and
        warranties that expressly refer to a different date) is and will be true
        and
        correct. 

       

      2.    As
        of the
        date of this Invoice Disbursement Request and as of the date of the Subsequent
        Commitment Increase, no Default or Event of Default has occurred and is
        continuing.

       

      3.    There
        has
        occurred no event, act or condition which has had or could have a Material
        Adverse Effect.

       

      
        
          	 	
                  PRC WILLISTON LLC

                   

                   

                  By:___________________________________

                  Name:

                  Title:

                

        

          
          

      

      
        
          
          

        

        
          Exhibit
            B-3

          
            

          

        

        
          
          

        

      

      EXHIBIT
        C

       

      FORM
        OF DIRECTION LETTER

       

      [DATE]

       

      __________________________

      __________________________

      __________________________

      __________________________

       

             
        Re:    Notice
        of
        Designated Account

       

      Ladies
        and Gentlemen:

       

      PRC
        Williston LLC, a Delaware limited liability company (“Borrower”)
        is the present payee from the properties (“Properties”) for the interests set
        forth on the attached Schedule hereto (the “Schedule”). Borrower hereby requests
        that you begin remitting its proceeds with respect to the Properties to a
        designated bank account.

       

      Accordingly,
        until further notice from each of Borrower and __________ (the holder, as
        Administrative Agent, of a security interest in the Properties), please direct
        all proceeds attributable to the properties and interests set forth on the
        Schedule for which you are purchasing production and which you credit to
        Borrower, effective as of the date hereto, to the address and account as
        set
        forth below:

       

      __________________________

      __________________________

      __________________________

      __________________________

       

      In
        order
        that we may have a record evidencing your acceptance of this Notice of
        Designated Account, we request that you execute one copy of this letter in
        the
        space provided below and return the same to us in the enclosed, self-addressed
        envelope.

       

      
        
          
            	 	
                    Yours very truly,

                     

                    PRC WILLISTON LLC

                     

                     

                    By:___________________________________

                    Name:

                    Title:

                  

          

           

          
             

            ACCEPTED
              THIS ____ DAY OF

            _____________,
              AND WE HAVE 

            CHANGED
              OUR RECORDS 

            EFFECTIVE
              WITH ___________

            PRODUCTION:

             

            
              By:
                ___________________________

              Name:
                _________________________

              Title:
                __________________________

               

            

          

          
            
              
              

            

            
              Exhibit
                C

              
                

              

            

            
              
              

            

          

        

      

       

      EXHIBIT
        D

       

      FORM
        OF

      COMPLIANCE
        CERTIFICATE

       

      The
        undersigned hereby certifies that he/she is the ___________ of PRC Williston
        LLC, a Delaware limited liability company (the “Borrower”),
        and
        that as such he/she is authorized to execute this certificate on behalf of
        the
        Borrower. With reference to the Credit Agreement dated as of December ___,
        2005
        (together with all amendments, restatements, supplements or other modifications
        thereto being the “Agreement”)
        among
        the Borrower, Drawbridge Special Opportunities Fund L P, as Administrative
        Agent, and the other agents and lenders (the “Lenders”)
        that
        are or become a party thereto, and such Lenders, the undersigned represents
        and
        warrants as follows (each capitalized term used herein having the same meaning
        given to it in the Agreement unless otherwise specified):

       

      (a)    The
        representations and warranties of the Borrower contained in Article VIII
        of the
        Agreement and in the Loan Documents and otherwise made in writing by or on
        behalf of the Borrower pursuant to the Agreement and the Loan Documents were
        true and correct 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 Lenders have expressly consented
        in
        writing to the contrary.

       

      (b)    The
        Borrower has performed and complied with all agreements and conditions contained
        in the 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
        January 1, 2007, no change has occurred, either in any case or in the aggregate,
        in the condition, financial or otherwise, of the Borrower 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 Borrower
        is in compliance with Section
        10.01
        and as
        of the end of the [fiscal
        quarter][fiscal year]
        ending
[          ].

       

      EXECUTED
        AND DELIVERED this [          ]
        day of
[          ].

       

      
        
          
            	 	
                    PRC WILLISTON LLC

                     

                     

                    By:___________________________________

                    Name:

                    Title:

                  

          

           

        

        
          
            
            

          

          
            Exhibit
              D

            
              

            

          

          
            
            

          

        

      

      EXHIBIT
        E-1

       

      FORM
        OF LEGAL OPINION OF MILES O SMITH,

      SPECIAL
        COUNSEL TO THE BORROWER

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Exhibit
            E-1

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        E-2

       

      FORM
        OF LEGAL OPINION OF

      [___________],
        SPECIAL NORTH DAKOTA COUNSEL TO THE BORROWER

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          Exhibit
            E-2

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        F-1

       

      SECURITY
        INSTRUMENTS

       

      
        	1)          
                	
                Guarantee
                  and Pledge Agreement of even date herewith between the Parent and
                  the
                  Administrative Agent.

              

      

       

      
        	2)          
                	
                Security
                  Agreement of even date herewith between the Borrower and the
                  Administrative Agent

              

      

       

      
        	3)          	
                Financing
                  Statements in respect of items 1 and
                  2.

              

      

       

      
        	4)          
                	
                Mortgage,
                  Fixture Filing, Assignment of As-Extracted Collateral, Security
                  Agreement
                  and Financing Statement dated of even date herewith by the Borrower,
                  as
                  Mortgagor, in Drawbridge Special Opportunities Fund L.P., as the
                  Administrative Agent, and the Secured
                  Creditors.

              

      

       

      
        	5)          
                	
                Financing
                  Statement in respect of item 41.

              

      

       

       

       

       

       

      

        
          

        

      

      
        1
          Is this
          FS necessary?

      

      
         

        
          
            
            

          

          
            Exhibit
              F-1

            
              

            

          

          
            
            

          

        

      

       

      EXHIBIT
        F-2

       

      FORM
        OF GUARANTEE AND PLEDGE AGREEMENT

       

      [See
        attached.]

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          Exhibit
            F-2

          
            

          

        

        
          
          

        

      

      
EXHIBIT
        G

       

      FORM
        OF ASSIGNMENT AND ASSUMPTION

       

      Reference
        is made to the Credit Agreement dated as of February __, 2007 (as amended
        and in
        effect on the date hereof, the “Credit
        Agreement”),
        among
        PRC Williston LLC, a Delaware limited liability company, the Lenders named
        therein and D.B. Zwirn Special Opportunities Fund, L.P., as Administrative
        Agent
        for the Lenders. Terms defined in the Credit Agreement are used herein with
        the
        same meanings.

       

      The
        Assignor named herein hereby sells and assigns, without recourse, to the
        Assignee named herein, and the Assignee hereby purchases and assumes, without
        recourse, from the Assignor, effective as of the Assignment Date set forth
        herein, the interests set forth on the grid below (the “Assigned
        Interest”)
        in the
        Assignor’s rights and obligations under the Credit Agreement, including, without
        limitation, the interests set forth on the grid below in the Commitment of
        the
        Assignor on the Assignment Date and Loans owing to the Assignor that are
        outstanding on the Assignment Date, but excluding accrued interest and fees
        to
        and excluding the Assignment Date. The Assignee hereby acknowledges receipt
        of a
        copy of the Credit Agreement and the other Loan Documents. From and after
        the
        Assignment Date (i) the Assignee shall be a party to and be bound by the
        provisions of the Credit Agreement and, to the extent of the Assigned Interest,
        have the rights and obligations of a Lenders thereunder and (ii) the Assignor
        shall, to the extent of the Assigned Interest, relinquish its rights and
        be
        released from its obligations under the Credit Agreement.

       

      As
        consideration for the sale and assignment contemplated hereby, the Assignee
        shall, on the Assignment Date, pay to the Assignor an amount equal to the
        principal amount of Loans assigned by the Assignor to the Assignee as set
        forth
        in the grid below. Except as otherwise provided in this Agreement, all payments
        hereunder shall be made in Dollars and in immediately available funds, without
        setoff, deduction or counterclaim.

       

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

       

      The
        Assignor does not make any representation or warranty, nor shall it have
        any
        responsibility to the Assignee, with respect to the accuracy of any recitals,
        statements, representations or warranties contained in the Loan Documents,
        or
        for the value, validity, effectiveness, genuineness, execution, effectiveness,
        legality, enforceability or sufficiency of the Loan Documents or any other
        document referred to or provided for therein or for any failure by the Borrower
        or any other Person to perform any of its obligations thereunder or for the
        existence, value, perfection or priority of any collateral security or the
        financial or other condition of the Borrower or any of its Subsidiaries or
        any
        other obligor or guarantor, or any other matter relating to the Loan Documents
        or any extension of credit thereunder.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Promptly
        following the receipt by the Assignor of the consideration required to be
        paid
        to it by the Assignee hereunder, the Assignor shall, in the manner contemplated
        by Section 2.02(d) of the Credit Agreement: (i) deliver to the Administrative
        Agent the Note held by the Assignor, and (ii) notify the Administrative Agent
        to
        request that the Borrower execute and deliver a new Note to (A) the Assignee,
        dated as of the Assignment Date, in the principal amount equal to the Commitment
        of the Assignee after giving effect to the sale and assignment contemplated
        hereby and (B) the Assignor, if the Assignor has assigned less than the full
        amount of its Commitment to the Assignee, dated as of the Assignment Date,
        in
        the principal amount equal to the Commitment of the Assignor after giving
        effect
        to the sale and assignment contemplated hereby.

       

      This
        Assignment and Assumption is being delivered to the Administrative Agent
        together with, if the Assignee is not already a Lender under the Credit
        Agreement, any information reasonably requested by the Administrative Agent.
        [The
        [Assignee/Assignor] shall pay the fee payable to the Administrative Agent
        pursuant to Section 12.04(b) of the Credit Agreement.] [The Administrative
        Agent
        hereby waives the fee payable to the Administrative Agent pursuant to Section
        12.04(b) of the Credit Agreement.]

       

      This
        Assignment and Assumption shall be governed by and construed in accordance
        with
        the laws of the State of New York.

       

      Legal
        Name of the Assignor: [                    ]

       

      Legal
        Name of Assignee: [                    ]

       

      Assignee’s
        Address for Notices: [                    ]

                         [                    ]

       

      Effective
        Date of Assignment (“Assignment
        Date”):
        [        ],
        200[   ]

       

      
        	
                Assignors

              	
                Maximum

                Credit

                Amount

                Assigned

              	
                Principal

                Amount

                of
                  Loans

                Assigned

              	
                Applicable

                Percentage
                  Assigned

                (set
                  forth as a

                percentage
                  of the

                total
                  Commitments)

              
	
                [                     ]

                 

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              
	
                [                     ]

                 

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              
	
                [                     ]

                 

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              
	
                [                     ]

                 

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              
	
                [                     ]

                 

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              
	
                Totals

              	
                $[  ],000,000.00

                 

              	
                $[  ],000,000.00

                 

              	
                [   ]%

                 

              

      

       

      
        
          
          

        

        
          Exhibit
            G

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption
        to be executed by their respective officers thereunto duly authorized, as
        of the
        Assignment Date.

       

      
        	ASSIGNORS:	
                [                       ],
                  as Assignor

                 

                 

                By:_____________________________

                Name:___________________________

                Title:____________________________

              
	 	 
	 	 
	 	
                [                       ],
                  as Assignor

                 

                 

                
                  By:_____________________________

                  Name:___________________________

                  Title:____________________________

                

              
	 	 
	 	 
	 	
                [                       ],
                  as Assignor

                 

                
                  
                     

                    By:_____________________________

                    Name:___________________________

                    Title:____________________________

                  

                

              
	 	 
	 	 
	ASSIGNEE:	
                [                       ],
                  as Assignee

                 

                
                   

                  By:_____________________________

                  Name:___________________________

                  Title:____________________________

                

              

      

       

      
        
          
          

        

        
          Exhibit
            G

          
            

          

        

        
          
          

        

      

       

      The
        undersigned hereby consent to the within assignments:2

       

      
        
          	PRC Williston LLC, Borrower	
                  D.B.
                    Zwirn Special Opportunities Fund, L.P., as Administrative
                    Agent,

                
	
                   

                   

                  By: ______________________________

                        
                    [Name]

                        
                    [Title]

                	
                   

                  
                    By:D.B.
                      Zwirn
                      Partners, LLC

                     

                  

                  By: ______________________________

                        
                    [Name]

                        
                    [Title]

                

        

      

       

       

       

       

       

       

       

       

      
        

      

      2
        Consents
        to be included to the extent required by Section 13.04(b) of the Credit
        Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
EXHIBIT
        H

       

      FORM
        OF CONVEYANCE OF OVERRIDING ROYALTY INTEREST

       

      [See
        attached.]

       

       

       

       

       

       

       

      
        
          
          

        

        
          Exhibit
            H

          
            

          

        

        
          
          

        

      

      
EXHIBIT
        I

       

      FORM
        OF PARTICIPATION AGREEMENT

       

      [See
        attached.]

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Exhibit
            I

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        J

       

      FORM
        OF LETTER-IN-LIEU

       

      ________________________

      ________________________

      ________________________

       

       

      Re:    Letter-in-Lieu
        of Transfer Order

       

      Ladies
        and Gentlemen:

       

      Enclosed
        is a copy of a Deed of Trust, Fixture Filing, Assignment of As-Extracted
        Collateral, Security Agreement and Financing Statement dated _______________
        (the “Mortgage”), from PRC Williston LLC, a Delaware limited liability company
        (“Mortgagor”), to D.B. Zwirn Special Opportunities Fund, L.P., as Administrative
        Agent (“Mortgagee”), creating a mortgage lien on the real property described
        therein and a security interest in the personal property and fixtures described
        therein.

       

      Mortgagee
        understands that, pursuant to division orders, transfer orders or other
        agreements, you are currently disbursing proceeds of production from one
        or more
        of the properties listed on the attached schedule (“Schedule”). Mortgagee
        requests that you change your records and begin making payment to Mortgagee
        for
        the interests of Mortgagor, as shown on Exhibit
        A
        to the
        Mortgage, for the property(ies) from which you are purchasing production
        and
        which you have previously credited to Mortgagor, effective as of the date
        hereof, at the address set forth below:

       

      ________________________

      ________________________

      ________________________

      ________________________

       

      In
        consideration of your acceptance of this Letter-in-Lieu of Transfer Order,
        Mortgagee hereby ratifies, confirms, adopts and agrees to be bound by all
        previous sales contracts, division orders and transfer orders heretofore
        executed by Mortgagor insofar as the same cover and relate to the interest
        shown
        on the attached Schedule. Mortgagor hereby agrees to indemnify, save and
        hold
        you harmless from and against any and all claims, demands, actions, judgments,
        damages, liabilities, losses, costs, charges, recoveries and other expense
        of
        every nature and character which you at any time shall or may sustain by
        reason
        of the payments to Mortgagee of proceeds of production as requested and
        authorized hereby; provided, however, the aggregate liability of Mortgagee
        with
        respect to any warranty, representation, covenant or indemnification contained
        in this letter or any previous sales contracts, division orders or transfer
        orders shall be limited to an amount equal to the amounts disbursed by you
        to
        Mortgagee hereunder. Recipient will not take any further orders regarding
        amendments to your records or these payment instructions from Mortgagor unless
        consented to by Mortgagee.

       

      
        
          
          

        

        
          Exhibit
            J

          
            

          

        

        
          
          

        

      

       

      In
        order
        that we may have a record evidencing your acceptance of this Letter-in-Lieu
        of
        Transfer Order, we request that you execute one copy of this letter in the
        space
        provided below and return the same to us in the enclosed self-addressed
        envelope.

       

      
        	 	Very truly yours,
	 	 
	 	MORTGAGOR:
	 	 
	 	PRC WILLISTON
                LLC
	 	 
	 	
                By:________________________________

                Name:______________________________

                Title:_______________________________

                 

                 

                MORTGAGEE:

                 

                
                  By:________________________________

                  Name:______________________________

                  Title:_______________________________

                   

                  Address:

                

              
	 	 

      

       

      ACCEPTED
        this ____ day of 

      ________,
        200__, and we have 

      changed
        our records effective

      with
        ________ production.

       

      ______________________________

       

      By:
        ___________________________

      Name:
        _________________________

      Title:
        __________________________

      
 

      
        
          
          

        

        
          Exhibit
            J

          
            

          

        

        
          
          

        

         

        EXHIBIT
          K

         

        DEVELOPMENT
          PLAN

      

      

      See
        attached.

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Exhibit
            K

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        1.01

      AFE
        REQUIREMENTS

       

       

      With
        respect to each AFE submitted, the Borrower shall provide the
        following:

       

      C    Opportunity
        Description

       

      Specific
        reference and identification of the Development Plan for which an AFE is
        submitted.

       

      C    Cost
        Break down for Dry Hole and Completion Activities

       

      Categories
        to include rig mobilization, well cost, well head and tree,
        structure/facilities, completion/tie-back, abandonment

       

      A
        comparison of the AFE Costs to the Projected Costs.

       

      C    Activity
        Time Schedule with Dates Identified for Each Activity

       

      Categories
        to include first funding, rig mobilization, spud, total depth,
        completion/tie-back, first production

       

      C    Schedule
        of Cost Estimates per Month, together with the aggregate amount not to be
        exceeded for such Development Project

      
         

        C    With
          respect to any AFE that represents an amendment of an existing AFE, changes
          to
          the AFE submitted shall include an update of opportunity description, including
          changes to technical data, timing and cost changes and impact on Net Present
          Value.

         

         

         

         

        
          
            
            

          

          
            Schedule
              1.01

            
              

            

          

          
            
            

          

           

        

      

      SCHEDULE
        1.02

       

      APPROVED
        COUNTERPARTIES

       

      None.

      

      

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            1.02

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.05

       

      LITIGATION

       

      None.

       

      

       

      

       

       

       

       

       

       

       

       

      
 

      
        
          
          

        

        
          Schedule
            8.05

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.06

       

      ENVIRONMENTAL
        MATTERS

       

      None.

       

      

       

      

       

      

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.06

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.13

       

      INSURANCE

       

      See
        attached Schedule.

       

      

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.13

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.15

       

      SUBSIDIARIES
        AND PARTNERSHIPS

       

      None.

       

      

       

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.15

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.17

       

      TITLE
        TO PROPERTIES

       

      See
        attached.

      

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.17

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.19

       

      GAS
        IMBALANCES

       

      None.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.19

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.20

       

      MARKETING
        CONTRACTS

       

      
        	1.         
                	
                Crude
                  Oil Purchase Contract dated July 25, 2002, by and between Nexen
                  Marketing
                  U.S.A. Inc. and Eagle Operating, Inc., as most recently amended
                  on August
                  22, 2006.

              

      

       

       

       

       

       

       

       

       

       

       

      

 

       

       

      
        
          
          

        

        
          Schedule
            8.20

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.21

       

      SWAP
        AGREEMENTS

      
 

      
        	1.             
                	
                [_____________________________________]
                  (To be provided by Borrower’s
                  counsel.)

              

      

       

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            8.21

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.25

       

      MATERIAL
        AGREEMENTS

       

      
        	1.          
                	
                Purchase
                  and Sale Agreement between Eagle Operating Inc., as Seller, and
                  Petro
                  Resources Corporation, as Buyer, executed and dated December 11,
                  2006, as
                  amended on or about January 25, 2007 to be effective January 25,
                  2007
                  (“PSA”), including both the Joint Operating Agreement and Unit Operating
                  Agreement in form(s) annexed to the PSA (the “Operating Agreements”),
                  which Operating Agreements will be executed and dated after closing
                  of the
                  PSA.

              

      

      

      
        	2.          
                	
                Engagement
                  Letter Agreement dated December 15, 2006 between Petro Resources
                  Corporation and Merrill Lynch &
Co.

              

      

      

      
        	3.         
                	
                Letter
                  Agreement dated September 16, 2006 between Petro Resources Corporation
                  and
                  Paul Urban and Lyle B. Gallivan. 

              

      

      

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          Schedule
            8.25

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        8.30

       

      PAST
        DUE ACCOUNTS PAYABLE

       

      

       

      None.

       

      

       

       

       

       

       

       

       

      

 

       

      
        
          
          

        

        
          Schedule
            8.30

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        9.02(e)

       

      NOTICE
        OF CERTAIN EVENTS

       

      The
        Borrower shall provide notice to Lenders upon the occurrence of each
        Environmental Event, Loss Event, Tax Event, Third Party Failure Event or
        Title
        Event as such terms are defined below.

       

      “Environmental
        Event”
means
        any of the following events, if such event would reasonably be expected to
        cause
        or result in a Material Reduction in Value (defined below) of the Collateral:
        any representation or warranty made by the Borrower or any other Person pursuant
        to any of the Loan Documents with respect to compliance with Environmental
        Laws
        shall fail to be correct in any material respect when made or deemed to be
        made;
        or any claim (whether based on tort, contractual liability, statutory or
        otherwise) on account of failure to comply with any Environmental Law or
        otherwise for damages or injury to the environment arising from, or relating
        to,
        or in respect of, any Collateral shall be asserted in writing against any
        Collateral, the Borrower, or any Environmental Violation (defined below)
        shall
        have occurred, or any investigation shall be commenced with respect to the
        Collateral.

       

      “Loss
        Event”
means
        any of the following events, if such event would reasonably be expected to
        cause
        or result in a Material Reduction in Value of the affected Collateral: any
        damage or destruction or casualty or theft, loss or disappearance or any
        taking
        or appropriation by any Governmental Authority under the power of eminent
        domain
        or otherwise affecting (a) any or all of the Collateral or (b) any equipment
        which is material to the operation, production, development, processing or
        the
        transporting of any hydrocarbons produced from the Collateral.

       

      “Tax
        Event”
means,
        on any date, any of the following events, if such event would reasonably
        be
        expected to cause or result in a Material Reduction in Value of the Collateral:
        (a) any failure by the Borrower or any other Person to pay any property tax
        or
        severance tax with respect to any Collateral when due and/or (b) any tax
        claim
        is asserted against the Borrower with respect to any Collateral or which
        is
        related in any way to income therefrom, to the Loans, or to any of the Loan
        Documents.

       

      “Third
        Party Failure Event”
means
        any of the following events, if such event would reasonably be expected to
        cause
        or result in a Material Reduction in Value of the Collateral: (a) any default
        by
        the Borrower under any Loan Document; (b) the occurrence of an event which
        excuses or could excuse performance under any Loan Document; (c) the occurrence
        of any event of the type described in Section
        11.01(h),
        (i),
        or
(j)
        with
        respect to any operator of the Collateral; (d) any representation or warranty
        made by the Borrower in any document entered into in connection with this
        Agreement or in any certificate delivered pursuant to any document entered
        into
        in connection with this Agreement is incorrect in any material respect when
        made
        or deemed made; or (e) the occurrence of any event or circumstance that would
        reasonably be expected to change the value or nature of the
        Collateral.

       

      
        
          
          

        

        
          Schedule
            9.02(e)

          
            

          

        

        
          
          

        

      

       

      “Title
        Event”
means,
        on any date, any of the following events, if such event would reasonably
        be
        expected to cause or result in a Material Reduction in Value of the Collateral:
        (a) the failure of the Borrower to be the true and lawful owner of, and to
        have
        good and indefeasible title to, any oil and gas property, or lease interest
        forming part of the Collateral free and clear of all Liens other than Excepted
        Liens or the Liens permitted pursuant to Section
        10.03
        of the
        Agreement; (b) the failure of any oil and gas lease or other interest described
        in any security agreement to be valid and subsisting and in full force and
        effect, insofar as it covers or relates to any Collateral; (c) any material
        agreement affecting the Collateral shall at any time cease to be valid, binding
        and enforceable against the Borrower in accordance with the terms of such
        document; (d) the Borrower shall suffer a writ or warrant of attachment or
        similar process to be issued by any court or any other creditor’s right shall be
        exercised or attempted to be exercised against any Collateral; or (e) any
        material representation or warranty with respect to title or ownership or
        lack
        of liens made by the Borrower under any Loan Document shall fail to be correct
        in any material respect; or (f) any Collateral shall become the subject matter
        of litigation which would or might, upon final determination result in
        impairment of ownership or title to the Collateral.

       

      As
        used
        in this schedule, the following terms shall have the meaning as set forth
        below:

       

      “Environmental
        Violation”
means
        (a) any violation (by the Borrower or any other Person) of (i) any Environmental
        Law or (ii) of any contractual obligation of such the Borrower, or any other
        Person contained in any agreement relating to activities regulated by
        Environmental Law in each such case, with respect to any Collateral or (b)
        any
        act or omission (by the Borrower or any other Person) that requires or will
        require any remedial, clean-up or similar action with respect to the Collateral
        under any applicable Environmental Law or otherwise including any tort claim,
        to
        the extent any such violation, act or omission in any way relates to the
        Collateral to any activities carried out on any such property constituting
        Collateral, or to any hazardous substances located on any such property or
        associated with activities on any such property. Included among “Environmental
        Violations” are (i) any action which is prohibited by (or which requires or will
        require any remedial, clean-up or similar action under) any applicable
        Environmental Law or otherwise including any tort claim at the time such
        action
        is taken, (ii) any action relating to disposal from or to any such property
        or
        to the transportation of hazardous substances to or from such property other
        than in the normal course of business and (iii) any failure to take action
        which
        is required by applicable Environmental Law, whether such failure is the
        failure
        to carry on operations in compliance with current applicable Environmental
        Law
        or otherwise including any tort claim or the failure to remediate or clean
        up
        earlier activities or omissions which were legal when taken or omitted, in
        each
        case to the extent such action or failure to act relates to the Borrower
        or the
        Mortgaged Properties.

       

      “Material
        Reduction in Value”
means
        a
        material reduction in the aggregate value of the Collateral securing the
        Indebtedness. With regard to the foregoing, it is understood and agreed that
        an
        adverse effect on the Borrower (including on the financial condition, business,
        or operations or on the ability of the Borrower to carry out its business
        or to
        meet its obligations under any Loan Document on a timely basis) or on any
        Hydrocarbons, including any effect on when such Hydrocarbons owned by the
        Borrower may be produced or delivered or, whether any Lien on the Collateral
        may
        be challenged, and any and all such effects, as well as any other relevant
        effects, shall be considered in determining whether there has been a Material
        Reduction in Value.

       

      
        
          
          

        

        
          Schedule
            9.02(e)

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.02

       

      DEBT

       

      None.

       

      

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            10.02

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.03

       

      EXCEPTED
        LIENS

       

      None.

       

      

       

       

       

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            10.03

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.05

       

      INVESTMENTS

       

      None.

       

      

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            10.05

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.07

       

      LEASES

       

      None.

       

      

       

       

       

       

       

       

       

       

       

       

      

 

      
        
          
          

        

        
          Schedule
            10.07

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        10.23

       

      NET
        SALES VOLUME SCHEDULE

       

       

      
        	
                Quarter

              	
                MBbl

              
	
                Second
                  Quarter 2007

              	
                25

              
	
                Third
                  Quarter 2007

              	
                30

              
	
                Fourth
                  Quarter 2007

              	
                30

              
	
                First
                  Quarter 2008

              	
                35

              
	
                Second
                  Quarter 2008

              	
                35

              
	
                Third
                  Quarter 2008

              	
                40

              
	
                Fourth
                  Quarter 2008

              	
                40

              
	
                First
                  Quarter 2009

              	
                50

              
	
                Second
                  Quarter 2009

              	
                70

              
	
                Third
                  Quarter 2009

              	
                100

              
	
                Fourth
                  Quarter 2009

              	
                120

              
	
                First
                  Quarter 2010

              	
                140

              
	
                Second
                  Quarter 2010

              	
                140

              
	
                Third
                  Quarter 2010

              	
                140

              
	
                Fourth
                  Quarter 2010

              	
                140

              

      

      

       

       

       

       

       

       

      Schedule
        10.23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}]]