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<SEC-DOCUMENT>0000950134-07-007227.txt : 20070402
<SEC-HEADER>0000950134-07-007227.hdr.sgml : 20070402
<ACCEPTANCE-DATETIME>20070402130517
ACCESSION NUMBER:		0000950134-07-007227
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		27
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20070402
DATE AS OF CHANGE:		20070402

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PRIMEENERGY CORP
		CENTRAL INDEX KEY:			0000056868
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				840637348
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-07406
		FILM NUMBER:		07737063

	BUSINESS ADDRESS:	
		STREET 1:		ONE LANDMARK SQ
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901
		BUSINESS PHONE:		2033585700

	MAIL ADDRESS:	
		STREET 1:		ONE LANDMARK SQ
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KRM PETROLEUM CORP
		DATE OF NAME CHANGE:	19900614
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d44173e10vk.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>U.S. SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>
<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(Mark One)</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the fiscal year ended December&nbsp;31, 2006</B>
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Or</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the Transition Period From </B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>to</B>
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Commission File Number 0-7406</B>

</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>PrimeEnergy Corporation</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>(Exact name of registrant as specified in its charter)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>84-0637348</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(state or other jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>One Landmark Square,</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Stamford, CT</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>06901</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT style="white-space: nowrap">(Address of principal executive offices)</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Registrant&#146;s telephone number, including area code: <B>(203)&nbsp;358-5700</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(b) of the Act:<BR>
<B>None</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(g) of the Act:<BR>
<B>Common Stock, par value $.10 per share</B><BR>
(Title of Class)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 1pt"><B>Yes <FONT face="Wingdings">&#111;</FONT> No </B><FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the Registrant is not required to file reports pursuant to Section&nbsp;13 of
Section&nbsp;15 (d)&nbsp;of the Act.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 1pt"><B>Yes <FONT face="Wingdings">&#111;</FONT> No </B><FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate whether Registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for such shorter period
that the Registrant was required to file such reports), and (2)&nbsp;has been subject to such filing
requirements for the past 90&nbsp;days.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 1pt"><B>Yes <FONT face="Wingdings">&#254;</FONT> No </B><FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of Registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 1pt"><FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer.
</DIV>

<DIV align="center" style="font-size: 10pt">Large Accelerated Filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated Filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Accelerated Filer <FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicated by check mark whether the Registrant is a shell company (as defined in Rule&nbsp;12b-2 of the
Exchange Act).
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 1pt"><B>Yes <FONT face="Wingdings">&#111;</FONT> No </B><FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate market value of the voting stock of the Registrant held by non-affiliates, computed
by reference to the average bid and asked price of such common equity as of the last business day
of the Registrant&#146;s most recently completed second fiscal quarter, was $56,753,549.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The number of shares outstanding of each class of the Registrant&#146;s Common Stock as of March&nbsp;26,
2007, was: 3,194,731 shares, Common Stock, $0.10 par value,
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 1pt">Portions of the Registrant&#146;s proxy statement to be furnished to stockholders in connection with its
Annual Meeting of Stockholders to be held in June,&nbsp;2007, are incorporated by reference in Part&nbsp;III
hereof.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#101">PART I</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#102">Item&nbsp;1. BUSINESS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#103">Item&nbsp;1A. RISK FACTORS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">12</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#104">Item&nbsp;1B. UNRESOLVED STAFF COMMENTS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">16</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#105">Item&nbsp;2. PROPERTIES
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">16</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#106">Item&nbsp;3. LEGAL PROCEEDINGS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#107">Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#108">PART II</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#109">Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">20</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#110">Item&nbsp;6. SELECTED FINANCIAL DATA
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">21</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#111">Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">21</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#112">Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">25</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#113">Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">27</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#114">Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">27</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#115">Item&nbsp;9A. CONTROLS AND PROCEDURES
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">27</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#116">Item&nbsp;9B. OTHER INFORMATION
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">27</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#117">PART III</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#118">Item&nbsp;10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#119">Item&nbsp;11. EXECUTIVE COMPENSATION
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#120">Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#121">Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#122">Item&nbsp;14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">28</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#123">PART IV</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><A href="#124">Item&nbsp;15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
</A></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">29</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#125">SIGNATURES
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">32</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w3w2.htm">First Amendment to the 401(k) Savings Plan</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w22w5.htm">Amended and Restated Credit Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w22w5w1.htm">Letter Regarding Amended and Restated Credit Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w2.htm">Amended and Restated Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w3.htm">Amended and Restated Security Agreement (Membership Pledge)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w4.htm">Amended and Restated Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w5.htm">Amended and Restated Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w6.htm">Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w7.htm">Amended and Restated Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w23w8.htm">Amended and Restated Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w25.htm">Credit Agreement - PrimeEnergy Corporation</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w26.htm">Credit Agreement - Guaranty Bank, FSB</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w26w1.htm">Subordination Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w27.htm">Security Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w27w1.htm">Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w27w2.htm">Pledge Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w28.htm">Completion and Liquidity Maintenance Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv10w29.htm">Put Right Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv14.htm">Code of Business Conduct and Ethics</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv21.htm">Subsidiaries</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv23.htm">Consent of Ryder Scott & Company L.P.</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv31w1.htm">Certification of CEO Pursuant to Rule 13(a)-14(a)/15d-14(a)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv31w2.htm">Certification of CFO Pursuant to Rule 13(a)-14(a)/15d-14(a)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv32w1.htm">Certification of CEO Pursuant to Section 1350</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="d44173exv32w2.htm">Certification of CFO Pursuant to Section 1350</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PrimeEnergy Corporation</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>FORM 10-K ANNUAL REPORT<BR>
For the Fiscal Year Ended<BR>
December&nbsp;31, 2006</B>

</DIV>
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PART I</B>

</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. BUSINESS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>General</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Report contains forward-looking statements that are based on management&#146;s current
expectations, estimates and projections. Words such as &#147;expects,&#148; &#147;anticipates,&#148; &#147;intends,&#148;
&#147;plans,&#148; &#147;believes,&#148; &#147;projects&#148; and &#147;estimates,&#148; and variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements constitute
&#147;forward-looking statements&#148; within the meaning of Section&nbsp;27A of the Securities Act of 1933, and
are subject to the safe harbors created thereby. These statements are not guarantees of future
performance and involve risks and uncertainties and are based on a number of assumptions that could
ultimately prove inaccurate and, therefore, there can be no assurance that they will prove to be
accurate. Actual results and outcomes may vary materially from what is expressed or forecast in
such statements due to various risks and uncertainties. These risks and uncertainties include,
among other things, volatility of oil and gas prices, competition, risks inherent in the Company&#146;s
oil and gas operations, the inexact nature of interpretation of seismic and other geological and
geophysical data, imprecision of reserve estimates, the Company&#146;s ability to replace and expand oil
and gas reserves, and such other risks and uncertainties described from time to time in the
Company&#146;s periodic reports and filings with the Securities and Exchange Commission. Accordingly,
stockholders and potential investors are cautioned that certain events or circumstances could cause
actual results to differ materially from those projected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PrimeEnergy Corporation (the &#147;Company&#148;) was organized in March, 1973, under the laws of the
State of Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is engaged in the oil and gas business through the acquisition, exploration,
development, and production of crude oil and natural gas. The Company&#146;s properties are located
primarily in Texas, Oklahoma, West Virginia, the Gulf of Mexico, New Mexico, Colorado and
Louisiana. The Company, through its subsidiaries Prime Operating Company, Southwest Oilfield
Construction Company, Eastern Oil Well Service Company and EOWS Midland Company, acts as operator
and provides well servicing support operations for many of the onshore oil and gas wells in which
the Company has an interest, as well as for third parties. The Company owns and operates properties
in the Gulf of Mexico through its subsidiary Prime Offshore L.L.C, formerly F-W Oil Exploration
L.L.C. The Company is also active in the acquisition of producing oil and gas properties through
joint ventures with industry partners. The Company&#146;s subsidiary, PrimeEnergy Management Corporation
(&#147;PEMC&#148;), acts as the managing general partner of 18 oil and gas limited partnerships (the
&#147;Partnerships&#148;), and acts as the managing trustee of two asset and income business trusts (&#147;the
Trusts&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Exploration, Development and Recent Activities</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s activities include development and exploratory drilling. The Company&#146;s strategy
is to develop a balanced portfolio of drilling prospects that includes lower risk wells with a high
probability of success and higher risk wells with greater economic potential.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2006, the Company had net capitalized costs related to oil and gas
properties of $289&nbsp;million, including $5&nbsp;million of undeveloped properties. Total expenditures for
the acquisition, exploration and development of the Company&#146;s properties during 2006 were $160
million of which $1.2&nbsp;million related to exploration costs expensed during 2006. Proved reserves as
of December&nbsp;31, 2006, were 94 BCFe of gas which consisted of 96% proved developed reserves and 4%
proved undeveloped reserves.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our offshore
exploration and development budget for 2007 is $40 million including facility
construction and installation. As of March, 2007, the Company has spent approximately $22&nbsp;million
drilling, completing and equipping wells in the Gulf of Mexico as part of our program to develop
our offshore properties. We have budgeted $20&nbsp;million for onshore exploration and development in
our core operating areas. As of March, 2007, the Company has committed approximately $7.2&nbsp;million
on wells in these areas that have been spudded since January&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Significant 2006 activity</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2006,
we participated in drilling a total of 75 gross wells, 74 successful wells and 1
dry hole. Offshore wells totaled 12, West Texas wells totaled 41 and the remaining wells were
drilled either in our core operating areas or under joint operating agreements where we are not the
operator. All of the successful onshore wells and 4 of the offshore wells are currently producing.
The remaining offshore wells have successfully tested gas production and the Company is currently
completing construction of pipelines and production facilities and expects to commence production
during the second quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes that its diversified portfolio approach to its drilling activities
results in more consistent and predictable economic results than might be experienced with a less
diversified or higher risk drilling program profile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company attempts to assume the position of operator in all acquisitions of producing
properties. The Company will continue to evaluate prospects for leasehold acquisitions and for
exploration and development operations in areas in which it owns interests and is actively pursuing
the acquisition of producing properties. In order to diversify and broaden its asset base, the
Company will consider acquiring the assets or stock in other entities and companies in the oil and
gas business. The main objective of the Company in making any such acquisitions will be to acquire
income producing assets so as to increase the Company&#146;s net worth and increase the Company&#146;s oil
and gas reserve base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company presently owns producing and non-producing properties located primarily in Texas,
Oklahoma, West Virginia, the Gulf of Mexico, New Mexico, Colorado and Louisiana, and owns a
substantial amount of well servicing equipment. The Company does not own any refinery or marketing
facilities, and does not currently own or lease any bulk storage facilities or pipelines other than
adjacent to and used in connection with producing wells and the interests in certain gas gathering
systems. All of the Company&#146;s oil and gas properties and interests are located in the United
States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, the supply of gas has exceeded demand on a cyclical basis, and the Company is
subject to a combination of shut-in and/or reduced takes of gas production during summer months.
Prolonged shut-ins could result in reduced field operating income from properties in which the
Company acts as operator.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exploration for oil and gas requires substantial expenditures particularly in exploratory
drilling in undeveloped areas, or &#147;wildcat drilling.&#148; As is customary in the oil and gas industry,
substantially all of the Company&#146;s exploration and development activities are conducted through
joint drilling and operating agreements with others engaged in the oil and gas business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summaries of the Company&#146;s oil and gas drilling activities, oil and gas production, and
undeveloped leasehold, mineral and royalty interests are set forth under Item&nbsp;2., &#147;Properties,&#148;
below. Summaries of the Company&#146;s oil and gas reserves, future net revenue and present value of
future net revenue are also set forth under Item&nbsp;2., &#147;Properties &#151; Reserves&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Well Operations</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s operations are conducted through a central office in Houston, Texas, and
district offices in Houston and Midland, Texas, Oklahoma City, Oklahoma, and Charleston, West
Virginia. The Company currently operates 1,545 oil and gas wells, 414 through the Houston office,
188 through the Midland office, 446 through the Oklahoma City office and 497 through the
Charleston, West Virginia office. Substantially all of the wells operated by the Company are wells
in which the Company has an interest.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates wells pursuant to operating agreements which govern the relationship
between the Company as operator and the other owners of working interests in the properties,
including the Partnerships, Trusts and joint venture participants. For each operated well, the
Company receives monthly fees that are competitive in the areas of operations and also is
reimbursed for expenses incurred in connection with well operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>The Partnerships, Trusts and Joint Ventures</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1975, PEMC has acted as managing general partner of various partnerships, trusts and
joint ventures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PEMC, as managing general partner of the Partnerships and managing trustee of the Trusts, is
responsible for all Partnership and Trust activities, the drilling of development wells and the
production and sale of oil and gas from productive wells. PEMC also provides administration,
accounting and tax preparation for the Partnerships and Trusts. PEMC is liable for all debts and
liabilities of the Partnerships and Trusts, to the extent that the assets of a given limited
partnership or trust are not sufficient to satisfy its obligations. The Company stopped sponsoring
partnerships and trusts in 1992. Today there are only 18 partnerships and two trusts remaining. The
aggregate number of limited partners in the Partnerships and beneficial owners of the Trusts now
administered by PEMC is approximately 3,775. This number, as well as the number of remaining
partnerships noted above, has decreased in recent years as the Company continues to buy back
limited partner interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Regulation</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Regulation of Transportation and Sale of Natural Gas:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the transportation and sale for resale of natural gas in interstate commerce
have been regulated pursuant to the Natural Gas Act of 1938, as amended (&#147;NGA&#148;), the Natural Gas
Policy Act of 1978, as amended (&#147;NGPA&#148;), and regulations promulgated there under by the Federal
Energy Regulatory Commission (&#147;FERC&#148;) and its predecessors. In the past, the federal government has
regulated the prices at which natural gas could be sold. While sales by producers of natural gas
can currently be made at uncontrolled market prices, Congress could reenact price controls in the
future. Deregulation of wellhead natural gas sales began with the enactment of the NGPA. In 1989,
Congress enacted the Natural Gas Wellhead Decontrol Act, as amended (the &#147;Decontrol Act&#148;). The
Decontrol Act removed all NGA and NGPA price and non-price controls affecting wellhead sales of
natural gas effective January&nbsp;1, 1993.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1985, FERC has endeavored to make natural gas transportation more accessible to natural
gas buyers and sellers on an open and non-discriminatory basis. FERC has stated that open access
policies are necessary to improve the competitive structure of the interstate natural gas pipeline
industry and to create a regulatory framework that will put natural gas sellers into more direct
contractual relations with natural gas buyers by, among other things, unbundling the sale of
natural gas from the sale of transportation and storage services. Beginning in 1992, FERC issued
Order No.&nbsp;636 and a series of related orders (collectively, &#147;Order No.&nbsp;636&#148;) to implement its open
access policies. As a result of the Order No.&nbsp;636 program, the marketing and pricing of natural gas
have been significantly altered. The interstate pipelines&#146; traditional role as wholesalers of
natural gas has been eliminated and replaced by a structure under which pipelines provide
transportation and storage service on an open access basis to others who buy and sell natural gas.
Although FERC&#146;s orders do not directly regulate natural gas producers, they are intended to foster
increased competition within all phases of the natural gas industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2000, FERC issued Order No.&nbsp;637 and subsequent orders (collectively, &#147;Order No.&nbsp;637&#148;),
which imposed a number of additional reforms designed to enhance competition in natural gas
markets. Among other things, Order No.&nbsp;637 revised FERC pricing policy by waiving price ceilings
for short-term released capacity for a two-year experimental period, and effected changes in FERC
regulations relating to scheduling procedures, capacity segmentation, penalties, rights of first
refusal and information reporting. Most major aspects of Order No.&nbsp;637 have been upheld on judicial
review, and most pipelines&#146; tariff filings to implement the requirements of Order No.&nbsp;637 have been
accepted by the FERC and placed into effect.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Outer Continental Shelf Lands Act (&#147;OCSLA&#148;), which FERC implements as to transportation
and pipeline issues, requires that all pipelines operating on or across the outer continental shelf
(&#147;OCS&#148;) provide open access, non-discriminatory transportation service. One of FERC&#146;s principal
goals in carrying out OCSLA&#146;s mandate is to increase transparency in the market to provide
producers and shippers on the OCS with greater assurance of open access service on pipelines
located on the OCS and non-discriminatory rates and conditions of service on such pipelines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It should be noted that FERC currently is considering whether to reformulate its test for
defining non-jurisdictional gathering in the shallow waters of the OCS and, if so, what form that
new test should take. The stated purpose of this initiative is to devise an objective test that
furthers the goals of the NGA by protecting producers from the unregulated market power of
third-party transporters of gas, while providing incentives for investment in production, gathering
and transportation infrastructure offshore. While we cannot predict whether FERC&#146;s gathering test
ultimately will be revised and, if so, what form such revised test will take, any test that
refunctionalizes as FERC-jurisdictional transmission facilities currently classified as gathering
would impose an increased regulatory burden on the owner of those facilities by subjecting the
facilities to NGA certificate and abandonment requirements and rate regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot accurately predict whether FERC&#146;s actions will achieve the goal of increasing
competition in markets in which our natural gas is sold. Additional proposals and proceedings that
might affect the natural gas industry are pending before FERC and the courts. The natural gas
industry historically has been very heavily regulated; therefore, there is no assurance that the
less stringent regulatory approach recently pursued by FERC will continue. However, we do not
believe that any action taken will affect us in a way that materially differs from the way it
affects other natural gas producers, gatherers and marketers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intrastate natural gas transportation is subject to regulation by state regulatory agencies.
The basis for intrastate regulation of natural gas transportation and the degree of regulatory
oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from
state to state. Insofar as such regulation within a particular state will generally affect all
intrastate natural gas shippers within the state on a comparable basis, we believe that the
regulation of similarly situated intrastate natural gas transportation in any states in which we
operate and ship natural gas on an intrastate basis will not affect our operations in any way that
is materially different from the effect of such regulation on our competitors.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Regulation of Transportation of Oil:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of crude oil, condensate and natural gas liquids are not currently regulated and are
made at negotiated prices. The transportation of oil in common carrier pipelines is also subject to
rate regulation. FERC regulates interstate oil pipeline transportation rates under the Interstate
Commerce Act. In general, interstate oil pipeline rates must be cost-based, although settlement
rates agreed to by all shippers are permitted and market-based rates may be permitted in certain
circumstances. Effective January&nbsp;1, 1995, FERC implemented regulations establishing an indexing
system (based on inflation) for transportation rates for oil that allowed for an increase or
decrease in the cost of transporting oil to the purchaser. A review of these regulations by the
FERC in 2000 was successfully challenged on appeal by an association of oil pipelines. On remand,
the FERC in February&nbsp;2003 increased the index slightly, effective July&nbsp;2001. Intrastate oil
pipeline transportation rates are subject to regulation by state regulatory commissions. The basis
for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given
to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate and
intrastate rates are equally applicable to all comparable shippers, we believe that the regulation
of oil transportation rates will not affect our operations in any way that is materially different
from the effect of such regulation on our competitors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further, interstate and intrastate common carrier oil pipelines must provide service on a
non-discriminatory basis. Under this open access standard, common carriers must offer service to
all shippers requesting service on the same terms and under the same rates. When oil pipelines
operate at full capacity, access is governed by prorationing provisions set forth in the pipelines&#146;
published tariffs. Accordingly, we believe that access to oil pipeline transportation services
generally will be available to us to the same extent as to our competitors.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Regulation of Production:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The production of oil and natural gas is subject to regulation under a wide range of local,
state and federal statutes, rules, orders and regulations. Federal, state and local statutes and
regulations require permits for drilling operations and plugging and abandonment, drilling bonds
and reports concerning operations. The states in which we own and operate properties have
regulations governing conservation matters, including provisions for the unitization or pooling of
oil and natural gas properties, the establishment of maximum allowable rates of production from oil
and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. Many
states also restrict production to the market demand for oil and natural gas, and states have
indicated interest in revising applicable regulations. The effect of these regulations is to limit
the amount of oil and natural gas that we can produce from our wells and to limit the number of
wells or the locations at which we can drill. Moreover, each state generally imposes a production
or severance tax with respect to the production and sale of oil, natural gas and natural gas
liquids within its jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our offshore operations are conducted on federal leases that are administered by
Minerals Management Service (&#147;MMS&#148;) and are required to comply with the regulations and orders
promulgated by MMS under OCSLA. Among other things, we are required to obtain prior MMS approval
for any exploration plans we pursue and our development and production plans for these leases. MMS
regulations also establish construction requirements for production facilities located on our
federal offshore leases and govern the plugging and abandonment of wells and the removal of
production facilities from these leases. Under limited circumstances, MMS could require us to
suspend or terminate our operations on a federal lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MMS also establishes the basis for royalty payments due under federal oil and natural gas
leases through regulations issued under applicable statutory authority. State regulatory
authorities establish similar standards for royalty payments due under state oil and natural gas
leases. The basis for royalty payments established by MMS and the state regulatory authorities is
generally applicable to all federal and state oil and natural gas lessees. Accordingly, we believe
that the impact of royalty regulation on our operations should generally be the same as the impact
on our competitors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to comply with these rules and regulations can result in substantial penalties.
The regulatory burden on the oil and natural gas industry increases our cost of doing business and,
consequently, affects our profitability. Our competitors in the oil and natural gas industry are
subject to the same regulatory requirements and restrictions that affect our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Taxation</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s oil and gas operations are affected by federal income tax laws applicable to the
petroleum industry. The Company is permitted to deduct currently, rather than capitalize,
intangible drilling and development costs incurred or borne by it. As an independent producer, the
Company is also entitled to a deduction for percentage depletion with respect to the first 1,000
barrels per day of domestic crude oil (and/or equivalent units of domestic natural gas) produced by
it, if such percentage depletion exceeds cost depletion. Generally, this deduction is computed
based upon the lesser of 100% of the net income, or 15% of the gross income from a property,
without reference to the basis in the property. The amount of the percentage depletion deduction so
computed which may be deducted in any given year is limited to 65% of taxable income. Any
percentage depletion deduction disallowed due to the 65% of taxable income test may be carried
forward indefinitely.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Notes 1 and 9 to the consolidated financial statements included in this Report for a
discussion of accounting for income taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Competition and Markets</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business of acquiring producing properties and non-producing leases suitable for
exploration and development is highly competitive. Competitors of the Company, in its efforts to
acquire both producing and non-producing properties, include oil and gas companies, independent
concerns, income programs and individual producers and operators, many of which have financial
resources, staffs and facilities substantially greater than those
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">available to the Company. Furthermore, domestic producers of oil and gas must not only compete
with each other in marketing their output, but must also compete with producers of imported oil and
gas and alternative energy sources such as coal, nuclear power and hydroelectric power. Competition
among petroleum companies for favorable oil and gas properties and leases can be expected to
increase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The availability of a ready market for any oil and gas produced by the Company at acceptable
prices per unit of production will depend upon numerous factors beyond the control of the Company,
including the extent of domestic production and importation of oil and gas, the proximity of the
Company&#146;s producing properties to gas pipelines and the availability and capacity of such
pipelines, the marketing of other competitive fuels, fluctuation in demand, governmental regulation
of production, refining, transportation and sales, general national and worldwide economic
conditions, and use and allocation of oil and gas and their substitute fuels. There is no assurance
that the Company will be able to market all of the oil or gas produced by it or that favorable
prices can be obtained for the oil and gas production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Listed below are the percent of the Company&#146;s total oil and gas sales made to each of the
customers whose purchases represented more than 10% of the Company&#146;s oil and gas sales.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Texon Distributing L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">36</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plains All American Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TEPPCO Crude Oil, L.L.C.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unimark LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cokinos Energy Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although there are no long-term purchasing agreements with these purchasers, the Company
believes that they will continue to purchase its oil and gas products and, if not, could be
replaced by other purchasers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Environmental Matters</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Various federal, state and local laws and regulations governing the protection of the
environment, such as the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (&#147;CERCLA&#148;), the Federal Water Pollution Control Act of 1972, as amended (the
&#147;Clean Water Act&#148;), and the Federal Clean Air Act, as amended (the &#147;Clean Air Act&#148;), affect our
operations and costs. In particular, our exploration, development and production operations, our
activities in connection with storage and transportation of oil and other hydrocarbons and our use
of facilities for treating, processing or otherwise handling hydrocarbons and related wastes may be
subject to regulation under these and similar state legislation. These laws and regulations:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>restrict the types, quantities and concentration of various substances that can be
released into the environment in connection with drilling and production activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limit or prohibit drilling activities on certain lands lying within wilderness, wetlands
and other protected areas; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Impose substantial liabilities for pollution resulting from our operations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Failure to comply with these laws and regulations may result in the assessment of administrative,
civil and criminal fines and penalties or the imposition of injunctive relief. Changes in
environmental laws and regulations occur regularly, and any changes that result in more stringent
and costly waste handling, storage, transport, disposal or cleanup requirements could materially
adversely affect our operations and financial position, as well as those in the oil and natural gas
industry in general. While we believe that we are in substantial compliance with current applicable
environmental laws and regulations and that continued compliance with existing requirements would
not have a material adverse impact on us, there is no assurance that this trend will continue in
the future.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As with the industry generally, compliance with existing regulations increases our overall
cost of business. The areas affected include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unit production expenses primarily related to the control and limitation of air
emissions and the disposal of produced water;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital costs to drill exploration and development wells primarily related to the
management and disposal of drilling fluids and other oil and natural gas exploration
wastes; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Capital costs to construct, maintain and upgrade equipment and facilities.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive Environmental Response, Compensation and Liability Act of 1980 (&#147;CERCLA&#148;).
CERCLA, also known as &#147;Superfund,&#148; imposes liability for response costs and damages to natural
resources, without regard to fault or the legality of the original act, on some classes of persons
that contributed to the release of a &#147;hazardous substance&#148; into the environment. These persons
include the &#147;owner&#148; or &#147;operator&#148; of a disposal site and entities that disposed or arranged for the
disposal of the hazardous substances found at the site. CERCLA also authorizes the Environmental
Protection Agency (&#147;EPA&#148;) and, in some instances, third parties to act in response to threats to
the public health or the environment and to seek to recover from the responsible classes of persons
the costs they incur. It is not uncommon for neighboring landowners and other third parties to file
claims for personal injury and property damage allegedly caused by the hazardous substances
released into the environment. In the course of our ordinary operations, we may generate waste that
may fall within CERCLA&#146;s definition of a &#147;hazardous substance.&#148; We may be jointly and severally
liable under CERCLA or comparable state statutes for all or part of the costs required to clean up
sites at which these wastes have been disposed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently own or lease properties that for many years have been used for the exploration
and production of oil and natural gas. Although we and our predecessors have used operating and
disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may
have been disposed or released on, under or from the properties owned or leased by us or on, under
or from other locations where these wastes have been taken for disposal. In addition, many of these
properties have been operated by third parties whose actions with respect to the treatment and
disposal or release of hydrocarbons or other wastes were not under our control. These properties
and wastes disposed on these properties may be subject to CERCLA and analogous state laws. Under
these laws, we could be required:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to remove or remediate previously disposed wastes, including wastes disposed or released
by prior owners or operators;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To clean up contaminated property, including contaminated groundwater; or to perform
remedial operations to prevent future contamination.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At this time, we do not believe that we are associated with any Superfund site and we have not
been notified of any claim, liability or damages under CERCLA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil Pollution Act of 1990. The Oil Pollution Act of 1990, as amended (the &#147;OPA&#148;), and
regulations there under impose liability on &#147;responsible parties&#148; for damages resulting from oil
spills into or upon navigable waters, and adjoining shorelines or in the exclusive economic zone of
the United States. Liability under OPA is strict, and under certain circumstances joint and
several, and potentially unlimited. A &#147;responsible party&#148; includes the owner or operator of an
onshore facility and the lessee or permittee of the area in which an offshore facility is located.
The OPA also requires the lessee or permittee of the offshore area in which a covered offshore
facility is located to establish and maintain evidence of financial responsibility in the amount of
$35.0&nbsp;million ($10.0&nbsp;million if the offshore facility is located landward of the seaward boundary
of a state) to cover liabilities related to an oil spill for which such person is statutorily
responsible. The amount of required financial responsibility may be increased above the minimum
amounts to an amount not exceeding $150.0&nbsp;million depending on the risk represented by the quantity
or quality of oil that is handled by the facility. We carry insurance coverage to meet these
obligations, which we believe is customary for comparable companies in our industry. A failure to
comply with OPA&#146;s requirements or
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inadequate cooperation during a spill response action may subject a responsible party to civil
or criminal enforcement actions. We are not aware of any action or event that would subject us to
liability under OPA, and we believe that compliance with OPA&#146;s financial responsibility and other
operating requirements will not have a material adverse effect on us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Environmental Protection Agency. The U.S. Environmental Protection Agency regulations
address the disposal of oil and natural gas operational wastes under three federal acts more fully
discussed in the paragraphs that follow. The Resource Conservation and Recovery Act of 1976, as
amended (&#147;RCRA&#148;), provides a framework for the safe disposal of discarded materials and the
management of solid and hazardous wastes. The direct disposal of operational wastes into offshore
waters is also limited under the authority of the Clean Water Act. When injected underground, oil
and natural gas wastes are regulated by the Underground Injection Control program under Safe
Drinking Water Act. If wastes are classified as hazardous, they must be properly transported, using
a uniform hazardous waste manifest, documented, and disposed at an approved hazardous waste
facility. We have coverage under the Region VI National Production Discharge Elimination System
Permit for discharges associated with exploration and development activities. We take the necessary
steps to ensure all offshore discharges associated with a proposed operation, including produced
waters, will be conducted in accordance with the permit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resource Conservation Recovery Act. RCRA is the principal federal statute governing the
treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements
and liability for failure to meet such requirements on a person who is either a &#147;generator&#148; or
&#147;transporter&#148; of hazardous waste or an &#147;owner&#148; or &#147;operator&#148; of a hazardous waste treatment,
storage or disposal facility. At present, RCRA includes a statutory exemption that allows most oil
and natural gas exploration and production waste to be classified as nonhazardous waste. A similar
exemption is contained in many of the state counterparts to RCRA. As a result, we are not required
to comply with a substantial portion of RCRA&#146;s requirements because our operations generate minimal
quantities of hazardous wastes. At various times in the past, proposals have been made to amend
RCRA to rescind the exemption that excludes oil and natural gas exploration and production wastes
from regulation as hazardous waste. Repeal or modification of the exemption by administrative,
legislative or judicial process, or modification of similar exemptions in applicable state
statutes, would increase the volume of hazardous waste we are required to manage and dispose of and
would cause us to incur increased operating expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clean Water Act. The Clean Water Act imposes restrictions and controls on the discharge of
produced waters and other wastes into navigable waters. Permits must be obtained to discharge
pollutants into state and federal waters and to conduct construction activities in waters and
wetlands. Certain state regulations and the general permits issued under the Federal National
Pollutant Discharge Elimination System program prohibit the discharge of produced waters and sand,
drilling fluids, drill cuttings and certain other substances related to the oil and natural gas
industry into certain coastal and offshore waters. Further, the EPA has adopted regulations
requiring certain oil and natural gas exploration and production facilities to obtain permits for
storm water discharges. Costs may be associated with the treatment of wastewater or developing and
implementing storm water pollution prevention plans. The Clean Water Act and comparable state
statutes provide for civil, criminal and administrative penalties for unauthorized discharges for
oil and other pollutants and impose liability on parties responsible for those discharges for the
costs of cleaning up any environmental damage caused by the release and for natural resource
damages resulting from the release. We believe that our operations comply in all material respects
with the requirements of the Clean Water Act and state statutes enacted to control water pollution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Safe Drinking Water Act. Underground injection is the subsurface placement of fluid through a
well, such as the reinjection of brine produced and separated from oil and natural gas production.
The Safe Drinking Water Act of 1974, as amended, establishes a regulatory framework for underground
injection, with the main goal being the protection of usable aquifers. The primary objective of
injection well operating requirements is to ensure the mechanical integrity of the injection
apparatus and to prevent migration of fluids from the injection zone into underground sources of
drinking water. Hazardous-waste injection well operations are strictly controlled, and certain
wastes, absent an exemption, cannot be injected into underground injection control wells. In
Louisiana and Texas, no underground injection may take place except as authorized by permit or
rule. We currently own and operate various underground injection wells. Failure to abide by our
permits could subject us to civil and/or criminal enforcement. We believe that we are in compliance
in all material respects with the requirements of applicable state underground injection control
programs and our permits.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marine Protected Areas. Executive Order 13158, issued on May&nbsp;26, 2000, directs federal
agencies to safeguard existing Marine Protected Areas (&#147;MPAs&#148;) in the United States and establish
new MPAs. The order requires federal agencies to avoid harm to MPAs to the extent permitted by law
and to the maximum extent practicable. It also directs the EPA to propose new regulations under the
Clean Water Act to ensure appropriate levels of protection for the marine environment. This order
has the potential to adversely affect our operations by restricting areas in which we may carry out
future development and exploration projects and/or causing us to incur increased operating
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marine Mammal and Endangered Species. Federal Lease Stipulations address the reduction of
potential taking of protected marine species (sea turtles, marine mammals, Gulf Sturgen and other
listed marine species). MMS permit approvals will be conditioned on collection and removal of
debris resulting from activities related to exploration, development and production of offshore
leases. MMS has issued Notices to Lessees and Operators (&#147;NTL&#148;) 2003-G06 advising of requirements
for posting of signs in prominent places on all vessels and structures and of an observing training
program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consideration of Environmental Issues in Connection with Governmental Approvals. Our
operations frequently require licenses, permits and/or other governmental approvals. Several
federal statutes, including OCSLA, the National Environmental Policy Act (&#147;NEPA&#148;), and the Coastal
Zone Management Act (&#147;CZMA&#148;) require federal agencies to evaluate environmental issues in
connection with granting such approvals and/or taking other major agency actions. OCSLA, for
instance, requires the U.S. Department of Interior (&#147;DOI&#148;) to evaluate whether certain proposed
activities would cause serious harm or damage to the marine, coastal or human environment.
Similarly, NEPA requires DOI and other federal agencies to evaluate major agency actions having the
potential to significantly impact the environment. In the course of such evaluations, an agency
would have to prepare an environmental assessment and, potentially, an environmental impact
statement. CZMA, on the other hand, aids states in developing a coastal management program to
protect the coastal environment from growing demands associated with various uses, including
offshore oil and natural gas development. In obtaining various approvals from the DOI, we must
certify that we will conduct our activities in a manner consistent with an applicable program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lead-Based Paints. Various pieces of equipment and structures owned by us may have been coated
with lead-based paints as was customary in the industry at the time these pieces of equipment were
fabricated and constructed. These paints may contain lead at a concentration high enough to be
considered a regulated hazardous waste when removed. If we need to remove such paints in connection
with maintenance or other activities and they qualify as a regulated hazardous waste, this would
increase the cost of disposal. High lead levels in the paint might also require us to institute
certain administrative and/or engineering controls required by the Occupational Safety and Health
Act and MMS to ensure worker safety during paint removal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Air Pollution Control. The Clean Air Act and state air pollution laws adopted to fulfill its
mandates provide a framework for national, state and local efforts to protect air quality. Our
operations utilize equipment that emits air pollutants subject to federal and state air pollution
control laws. These laws require utilization of air emissions abatement equipment to achieve
prescribed emissions limitations and ambient air quality standards, as well as operating permits
for existing equipment and construction permits for new and modified equipment. Air emissions
associated with offshore activities are projected using a matrix and formula supplied by MMS, which
has primacy from the Environmental Protection Agency for regulating such emissions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Naturally Occurring Radioactive Materials (&#147;NORM&#148;). NORM are materials not covered by the
Atomic Energy Act, whose radioactivity is enhanced by technological processing such as mineral
extraction or processing through exploration and production conducted by the oil and natural gas
industry. NORM wastes are regulated under the RCRA framework, but primary responsibility for NORM
regulation has been a state function. Standards have been developed for worker protection,
treatment, storage and disposal of NORM waste, management of waste piles, containers and tanks; and
limitations upon the release of NORM contaminated land for unrestricted use. We believe that our
operations are in material compliance with all applicable NORM standards established by the states,
as applicable.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Employees</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;2007, the Company had 229 full-time and 14 part-time employees, 21 of whom were
employed by the Company at its principal offices in Stamford, Connecticut, 28 in Houston, Texas, at
the offices of Prime Operating Company, Eastern Oil Well Service Company, EOWS Midland Company and
Prime Offshore L.L.C., and 194 employees who were primarily involved in the district operations of
the Company in Houston and Midland, Texas, Oklahoma City, Oklahoma and Charleston, West Virginia.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. RISK FACTORS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Natural gas and oil prices fluctuate widely, and low prices for an extended period of time are
likely to have a material adverse impact on our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues, operating results, financial condition and ability to borrow funds or obtain
additional capital depend substantially on prevailing prices for natural gas and, to a lesser
extent, oil. Lower commodity prices may reduce the amount of natural gas and oil that we can
produce economically. Historically, natural gas and oil prices and markets have been volatile, with
prices fluctuating widely, and they are likely to continue to be volatile. Depressed prices in the
future would have a negative impact on our future financial results. Because our reserves are
predominantly natural gas, changes in natural gas prices may have a particularly large impact on
our financial results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prices for natural gas and oil are subject to wide fluctuations in response to relatively
minor changes in the supply of and demand for natural gas and oil, market uncertainty and a variety
of additional factors that are beyond our control. These factors include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of consumer product demand;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>weather conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>political conditions in natural gas and oil producing regions, including the Middle East;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of the members of the Organization of Petroleum Exporting Countries to agree
to and maintain oil price and production controls;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price of foreign imports;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>actions of governmental authorities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pipeline capacity constraints;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inventory storage levels;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>domestic and foreign governmental regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price, availability and acceptance of alternative fuels; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overall economic conditions</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These factors and the volatile nature of the energy markets make it impossible to predict with
any certainty the future prices of natural gas and oil. If natural gas prices decline significantly
for a sustained period of time, the lower prices may adversely affect our ability to make planned
expenditures, raise additional capital or meet our financial obligations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Drilling natural gas and oil wells is a high-risk activity.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth is materially dependent upon the success of our drilling program. Drilling for
natural gas and oil involves numerous risks, including the risk that no commercially productive
natural gas or oil reservoirs will be encountered. The cost of drilling, completing and operating
wells is substantial and uncertain, and drilling operations may be curtailed, delayed or cancelled
as a result of a variety of factors beyond our control, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unexpected drilling conditions, pressure or irregularities in formations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>equipment failures or accidents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse weather conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compliance with governmental requirements; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shortages or delays in the availability of drilling rigs or crews and the delivery of equipment.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future drilling activities may not be successful and, if unsuccessful, such failure will
have an adverse effect on our future results of operations and financial condition. Our overall
drilling success rate or our drilling success rate for activity within a particular geographic area
may decline. We may ultimately not be able to lease or drill identified or budgeted prospects
within our expected time frame, or at all. We may not be able to lease or drill a particular
prospect because, in some cases, we identify a prospect or drilling location before seeking an
option or lease rights in the prospect or location. Similarly, our drilling schedule may vary from
our capital budget. The final determination with respect to the drilling of any scheduled or
budgeted wells will be dependent on a number of factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the results of exploration efforts and the acquisition, review and analysis of the
seismic data;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability of sufficient capital resources to us and the other participants for
the drilling of the prospects;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the approval of the prospects by other participants after additional data has been
compiled;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic and industry conditions at the time of drilling, including prevailing and
anticipated prices for natural gas and oil and the availability of drilling rigs and crews;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our financial resources and results; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability of leases and permits on reasonable terms for the prospects.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These projects may not be successfully developed and the wells, if drilled, may not encounter
reservoirs of commercially productive natural gas or oil.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Reserve estimates depend on many assumptions that may prove to be inaccurate. Any material
inaccuracies in our reserve estimates or underlying assumptions could cause the quantities and net
present value of our reserves to be overstated.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserve engineering is a subjective process of estimating underground accumulations of natural
gas and crude oil that cannot be measured in an exact manner. The process of estimating quantities
of proved reserves is complex and inherently uncertain, and the reserve data included in this
document are only estimates. The process relies on interpretations of available geologic,
geophysic, engineering and production data. As a result, estimates of different engineers may vary.
In addition, the extent, quality and reliability of this technical data can vary. The differences
in the reserve estimation process are substantially due to the geological conditions in which the
wells are drilled. The process also requires certain economic assumptions, some of which are
mandated by the SEC, such as natural gas
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and oil prices. Additional assumptions include drilling and operating expenses, capital
expenditures, taxes and availability of funds. The accuracy of a reserve estimate is a function of:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the quality and quantity of available data;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the interpretation of that data</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the accuracy of various mandated economic assumptions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the judgment of the persons preparing the estimate.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Results of drilling, testing and production subsequent to the date of an estimate may justify
revising the original estimate. Accordingly, initial reserve estimates often vary from the
quantities of natural gas and crude oil that are ultimately recovered, and such variances may be
material. Any significant variance could reduce the estimated quantities and present value of our
reserves. You should not assume that the present value of future net cash flows from our proved
reserves is the current market value of our estimated natural gas and oil reserves. In accordance
with SEC requirements, we base the estimated discounted future net cash flows from our proved
reserves on prices and costs in effect on the date of the estimate, holding the prices and costs
constant throughout the life of the properties. Actual future prices and costs may differ
materially from those used in the net present value estimate, and future net present value
estimates using then current prices and costs may be significantly less than the current estimate.
In addition, the 10% discount factor we use when calculating discounted future net cash flows for
reporting requirements in compliance with the Financial Accounting Standards Board in Statement of
Financial Accounting Standards No.&nbsp;69 may not be the most appropriate discount factor based on
interest rates in effect from time to time and risks associated with us or the natural gas and oil
industry in general.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Our future performance depends on our ability to find or acquire additional natural gas and
oil reserves that are economically recoverable.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, the production rate of natural gas and oil properties declines as reserves are
depleted, with the rate of decline depending on reservoir characteristics. Unless we successfully
replace the reserves that we produce, our reserves will decline, eventually resulting in a decrease
in natural gas and oil production and lower revenues and cash flow from operations. Our future
natural gas and oil production is, therefore, highly dependent on our level of success in finding
or acquiring additional reserves. We may not be able to replace reserves through our exploration,
development and exploitation activities or by acquiring properties at acceptable costs. Low natural
gas and oil prices may further limit the kinds of reserves that we can develop economically. Lower
prices also decrease our cash flow and may cause us to decrease capital expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exploration, development and exploitation activities involve numerous risks that may result in
dry holes, the failure to produce natural gas and oil in commercial quantities and the inability to
fully produce discovered reserves.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are continually identifying and evaluating opportunities to acquire natural gas and oil
properties. We may not be able to successfully consummate any acquisition, to acquire producing
natural gas and oil properties that contain economically recoverable reserves, or to integrate the
properties into our operations profitably.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We face a variety of hazards and risks that could cause substantial financial losses.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business involves a variety of operating risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>blowouts, cratering and explosions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>mechanical problems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>uncontrolled flows of natural gas, oil or well fluids;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>formations with abnormal pressures;</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pollution and other environmental risks; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>natural disasters.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we conduct operations in shallow offshore areas, which are subject to additional
hazards of marine operations, such as capsizing, collision and damage from severe weather. Any of
these events could result in injury or loss of human life, loss of hydrocarbons, significant damage
to or destruction of property, environmental pollution, regulatory investigations and penalties,
impairment of our operations and substantial losses to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operation of natural gas gathering and pipeline systems also involves various risks,
including the risk of explosions and environmental hazards caused by pipeline leaks and ruptures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We have limited control over the activities on properties we do not operate.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other companies operate some of the properties in which we have an interest. We have limited
ability to influence or control the operation or future development of these non-operated
properties or the amount of capital expenditures that we are required to fund with respect to them.
The failure of an operator of our wells to adequately perform operations, an operator&#146;s breach of
the applicable agreements or an operator&#146;s failure to act in ways that are in our best interest
could reduce our production and revenues. Our dependence on the operator and other working interest
owners for these projects and our limited ability to influence or control the operation and future
development of these properties could materially adversely affect the realization of our targeted
returns on capital in drilling or acquisition activities and lead to unexpected future costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Terrorist activities and the potential for military and other actions could adversely affect
our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The threat of terrorism and the impact of military and other action have caused instability in
world financial markets and could lead to increased volatility in prices for natural gas and oil,
all of which could adversely affect the markets for our operations. Future acts of terrorism could
be directed against companies operating in the United States. The U.S. government has issued public
warnings that indicate that energy assets might be specific targets of terrorist organizations.
These developments have subjected our operations to increased risk and, depending on their ultimate
magnitude, could have a material adverse effect on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Our ability to sell our natural gas and oil production could be materially harmed if we fail
to obtain adequate services such as transportation and processing</B><B><I>.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The sale of our natural gas and oil production depends on a number of factors beyond our
control, including the availability and capacity of transportation and processing facilities. Our
failure to obtain these services on acceptable terms could materially harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Competition in our industry is intense, and many of our competitors have substantially greater
financial and technological resources than we do, which could adversely affect our competitive
position.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition in the natural gas and oil industry is intense. Major and independent natural gas
and oil companies actively bid for desirable natural gas and oil properties, as well as for the
equipment and labor required to operate and develop these properties. Our competitive position is
affected by price, contract terms and quality of service, including pipeline connection times,
distribution efficiencies and reliable delivery record. Many of our competitors have financial and
technological resources and exploration and development budgets that are substantially greater than
ours. These companies may be able to pay more for exploratory projects and productive natural gas
and oil properties and may be able to define, evaluate, bid for and purchase a greater number of
properties and prospects than our financial or human resources permit. In addition, these companies
may be able to expend greater resources on the existing and changing technologies that we believe
are and will be increasingly important to attaining success in the industry.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We may have hedging arrangements that expose us to risk of financial loss and limit the
benefit to us of increases in prices for natural gas and oil.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, when we believe that market conditions are favorable, we use certain
derivative financial instruments to manage price risks associated with our production in all of our
regions. These hedging arrangements limit the benefit to us of increases in prices. We will
continue to evaluate the benefit of employing derivatives in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The loss of key personnel could adversely affect our ability to operate.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are dependent upon a relatively small group of key management and technical
personnel, and one or more of these individuals could leave our employment. The unexpected loss of
the services of one or more of these individuals could have a detrimental effect on us. In
addition, our drilling success and the success of other activities integral to our operations will
depend, in part, on our ability to attract and retain experienced geologists, engineers and other
professionals. Competition for experienced geologists, engineers and some other professionals is
extremely intense. If we cannot retain our technical personnel or attract additional experienced
technical personnel, our ability to compete could be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We are subject to complex laws and regulations, including environmental regulations, which can
adversely affect the cost, manner or feasibility of doing business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are subject to extensive federal, state and local laws and regulations,
including tax laws and regulations and those relating to the generation, storage, handling,
emission, transportation and discharge of materials into the environment. These laws and
regulations can adversely affect the cost, manner or feasibility of doing business. Many laws and
regulations require permits for the operation of various facilities, and these permits are subject
to revocation, modification and renewal. Governmental authorities have the power to enforce
compliance with their regulations, and violations could subject us to fines, injunctions or both.
These laws and regulations have increased the costs of planning, designing, drilling, installing
and operating natural gas and oil facilities. In addition, we may be liable for environmental
damages caused by previous owners of property we purchase or lease. Risks of substantial costs and
liabilities related to environmental compliance issues are inherent in natural gas and oil
operations. It is possible that other developments, such as stricter environmental laws and
regulations, and claims for damages to property or persons resulting from natural gas and oil
production, would result in substantial costs and liabilities.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1 B. UNRESOLVED STAFF COMMENTS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a non-accelerated filer and no response is required pursuant to this Item.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. PROPERTIES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s executive offices are located in leased premises at One Landmark Square,
Stamford, Connecticut. The executive offices of Prime Operating Company, Eastern Oil Well Service
Company, EOWS Midland Company and Prime Offshore L.L.C., are located in leased premises in Houston,
Texas, and the offices of Southwest Oilfield Construction Company are in Oklahoma City, Oklahoma.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company maintains district offices in Houston and Midland, Texas, Oklahoma City, Oklahoma
and Charleston, West Virginia, and has field offices in Carrizo Springs and Midland, Texas,
Kingfisher and Garvin, Oklahoma and Orma, West Virginia.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of the Company&#146;s oil and gas properties are subject to a mortgage given to
collateralize indebtedness of the Company, or are subject to being mortgaged upon request by the
Company&#146;s lender for additional collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information set forth below concerning the Company&#146;s properties, activities, and oil and
gas reserves include the Company&#146;s interests in affiliated entities.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the exploratory and development drilling experience with
respect to wells in which the Company participated during the five years ended December&nbsp;31, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exploratory:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Oil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Oil and Gas Production</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2006, the Company had ownership interests in the following numbers of gross
and net producing oil and gas wells and gross and net producing acres (1).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Producing wells (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Oil Wells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
     <TD align="right">264.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gas Wells</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Producing Acres</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294,568.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,810.59</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>A gross well or gross acre is a well or an acre in which a working interest is owned. A net
well or net is the sum of the fractional revenue interests owned in gross wells or gross
acres. Wells are classified by their primary product. Some wells produce both oil and gas.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the Company&#146;s net production of crude oil and natural gas for each
of the five years ended December&nbsp;31, 2006. &#147;Net&#148; production is net after royalty interests of
others are deducted and is determined by multiplying the gross production volume of properties in
which the Company has an interest by percentage of the leasehold, mineral or royalty interest owned
by the Company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil (barrels)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">379,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas (Mcf)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,695,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,758,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,138,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,991,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,540,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the Company&#146;s average sales price per barrel of crude oil
and average sales prices per one thousand cubic feet (&#147;Mcf&#148;) of gas, together with the Company&#146;s
average production costs per unit of production for the five years ended December&nbsp;31, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average sales price per barrel</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average sales price Per Mcf</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average production costs per net
equivalent barrel (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.80</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Net equivalent barrels are computed at a rate of 6 Mcf per barrel.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Undeveloped Acreage</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the approximate gross and net undeveloped acreage in which the
Company has leasehold, mineral and royalty interests as of December&nbsp;31, 2006. &#147;Undeveloped acreage&#148;
is that acreage on which wells have not been drilled or completed to a point that would permit the
production of commercial quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Leasehold</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Mineral</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Royalty</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Interests</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Interests</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Interests</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Net</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>State</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Acres</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gulf of Mexico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Montana</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nebraska</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North Dakota</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oklahoma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Texas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">New Mexico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wyoming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Reserves</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s interests in proved developed and undeveloped oil and gas properties have been
evaluated by Ryder Scott Company, L.P. for each of the five years ended December&nbsp;31, 2006. All of
the Company&#146;s reserves are located within the continental United States. The following table
summarizes the Company&#146;s oil and gas reserves at each of the respective dates (figures rounded):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Reserve Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Proved Developed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Proved Undeveloped</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gas</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>12-31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(bbls)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(bbls)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(bbls)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,917,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,865,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,045,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,960,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,905,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,005,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,728,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,142,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,932,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,870,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,504,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">968,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,687,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,944,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,009,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,754,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,228,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,233,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated future net revenue (using current prices and costs as of those dates:) and the
present value of future net revenue (at a 10% discount for estimated timing of cash flow) for the
Company&#146;s proved developed and proved undeveloped oil and gas reserves at the end of each of the
five years ended December&nbsp;31, 2006, are summarized as follows (figures rounded):
</DIV>
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Proved Developed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Proved Undeveloped</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value 10</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value 10</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Present Value 10</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Standardized</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD nowrap align="center"><B>As of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Of Future</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Measure of</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>12-31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Net Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Income Taxes</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Discounted Cash flow</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,855,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,079,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,776,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">141,194,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,695,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,891,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,401,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,085,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,096,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,844,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,252,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">177,916,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,484,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,796,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,912,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,501,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">349,816,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,883,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,663,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362,326,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,546,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,067,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,479,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">360,665,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,216,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,836,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,077,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,501,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249,293,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,670,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,623,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PV 10 Value represents the discounted future net cash flows attributable to our
proved oil and gas reserves before income tax, discounted at 10%. Although it is a non-GAAP
measure, we believe that the presentation of the PV 10 Value is relevant and useful to our
investors because it presents the discounted future net cash flow attributable to our proved
reserves prior to taking into account corporate future income taxes and our current tax structure.
We use this measure when assessing the potential return on investment related to our oil and gas
properties. The standardized measure of discounted future net cash flows represents the present
value of future cash flows attributable to our proved oil and natural gas reserves after income
tax, discounted at 10%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proved developed&#148; oil and gas reserves are reserves that can be expected to be recovered from
existing wells with existing equipment and operating methods. &#147;Proved undeveloped&#148; oil and gas
reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for recompletion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with FASB Statement No.&nbsp;69, December&nbsp;31 market prices are determined using the
daily oil price or daily gas sales price (&#147;spot price&#148;) adjusted for oilfield or gas gathering hub
and wellhead price differentials (e.g. grade, transportation, gravity, sulfur, and BS&#038;W) as
appropriate. Also in accordance with SEC and FASB specifications, changes in market prices
subsequent to December&nbsp;31 are not considered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The spot price for gas at December&nbsp;31, 2006 and 2005, was $5.62 and $10.05 per MMBTU,
respectively. The range of spot prices during the year 2006 was a low of $3.66 and a high of $9.95
and the average was $6.76. The range during the first quarter of 2007 has been from $5.50 to $8.98,
with an average of $7.27. The recent futures market prices have traded above $6.72 per MMBTU.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The NYMEX price for oil at December&nbsp;31, 2006 and 2005, was $61.06 and $61.04 per barrel,
respectively. The range of NYMEX prices during the year 2006 was a low of $56.26 and a high of
$77.03 and the average was $66.14. The range during the first quarter of 2007 has been from $50.48
to $62.91, with an average of $57.93. The recent futures market prices have fluctuated around
$62.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While it may reasonably be anticipated that the prices received by the Company for the sale of
its production may be higher or lower than the prices used in this evaluation, as described above,
and the operating costs relating to such production may also increase or decrease from existing
levels, such possible changes in prices and costs were, in accordance with rules adopted by the
SEC, omitted from consideration in making this evaluation for the SEC case. Actual volumes
produced, prices received and costs incurred by the Company may vary significantly from the SEC
case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2007, the Company has not filed any estimates of its oil and gas reserves
with, nor were any such estimates included in any reports to, any federal authority or agency,
other than the Securities and Exchange Commission, except Form EIA-23, Annual Survey of Domestic
Oil and Gas Reserves, filed with The Energy Information Administration of the U.S. Department of
Energy.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. LEGAL PROCEEDINGS</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, the Company is party to certain legal actions and claims arising in the
ordinary course of business. While the outcome of these events cannot be predicted with certainty,
management does not expect these matters to have a materially adverse effect on the financial
position or results of operations of the Company.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No matters were submitted during the fourth quarter of the fiscal year ended December&nbsp;31,
2006, to a vote of the Company&#146;s security-holders through the solicitation of proxies or otherwise.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following performance graph and related information shall not be deemed &#147;soliciting
material&#148; or to be &#147;filed&#148; with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of 1933 or Securities
Exchange Act of 1934, each as amended, except to the extent that PrimeEnergy Corporation
specifically incorporates it by reference into such filing.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following graph illustrates the yearly percentage change in the cumulative stockholder return
on our common stock, compared with the cumulative total return on The Nasdaq Stock Market (U.S.
Companies) Index and the Nasdaq Stocks &#151; Crude Petroleum and Natural Gas Index, for the
five years ended December&nbsp;31, 2006.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Comparison of Five Year Cumulative Total Return<BR>
PrimeEnergy Corporation Stock Price vs. NASDAQ AND NASDAQ E&#038;P INDICES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Value of Investment of $100 on December&nbsp;31, 2001</B>

</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="d44173d4417300.gif" alt="(GRAPH)" >
</DIV>




<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">As of December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PrimeEnergy Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">183.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">262.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">645.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">810.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NASDAQ Market Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peer Group Index</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468.5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Common Stock is traded in the NASDAQ Stock Market, trading symbol
&#147;PNRG&#148;. The high and low bid quotations for each quarterly period during the two years ended
December&nbsp;31, 2006, were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">86.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">66.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">47.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">72.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fourth Quarter</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36.00</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The above quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not represent actual transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of record holders of the Company&#146;s Common Stock as of March&nbsp;15, 2007, was 858.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dividends have been declared or paid during the past two years on the Company&#146;s Common
Stock. Provisions of the Company&#146;s line of credit agreement restrict the Company&#146;s ability to pay
dividends. Such
dividends may be declared out of funds legally available therefore, when and as declared by
the Company&#146;s Board of Directors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Issuer Purchases of Equity Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1993, we announced that our Board of Directors authorized a stock repurchase
program whereby we may purchase outstanding shares of our Common Stock from time-to-time, in open
market transactions or negotiated sales. A total of 2,400,000 shares have been authorized, to date,
under this program. On November&nbsp;10, 2006, the board of Directors authorized the Company to purchase
up to an additional 300,000 shares of its Common Stock. Through December&nbsp;31, 2006, we repurchased a
total of 2,334,106 shares under this program for $24,699,359 at an average price of $10.58 per
share. Additional purchases of shares may occur as market conditions warrant. We expect future
purchases will be funded with internally generated cash flow or from working capital.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares that May Yet</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Average Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Be Purchased Under The</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>2006 Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>per share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Program</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,491</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">July</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">376,791</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">November</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,894</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total/Average/Remainder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. SELECTED FINANCIAL DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes certain selected financial data to highlight significant trends
in the Company&#146;s financial condition and results of operations for the periods indicated. The
selected financial data should be read in conjunction with the Financial Statements and related
notes included elsewhere in this Report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">92,419,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,946,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,428,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,719,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,186,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,584,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,151,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,359,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,168,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,702,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,757,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">291,572,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">109,383,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,255,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,887,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">168,141,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,126,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,290,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,925,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,734,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This discussion should be read in conjunction with the financial statements of the Company and
notes thereto. The Company&#146;s subsidiaries are defined in Note 1 of the financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Liquidity And Capital Resources:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flow provided by operations for the year ended December&nbsp;31, 2006, was $31.9&nbsp;million,
compared to $18.6&nbsp;million in the prior year. The change reflects the increase in oil and gas prices
throughout the entire year, combined
with changes in our working capital accounts. We expect sufficient cash flow to be provided by
operations during
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2007 because of higher projected production from new properties, combined with
oil and gas prices consistent with 2006 and steady operating, general and administrative, interest
and financing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excluding the effects of significant unforeseen expenses or other income, our cash flow from
operations fluctuates primarily because of variations in oil and gas production and prices or
changes in working capital accounts. Our oil and gas production will vary based on actual well
performance but may be curtailed due to factors beyond our control. Hurricanes in the Gulf of
Mexico may shut down our production for the duration of the storm&#146;s presence in the Gulf or damage
production facilities so that we cannot produce from a particular property for an extended amount
of time. In addition, downstream activities on major pipelines in the Gulf of Mexico can also cause
us to shut-in production for various lengths of time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our realized oil and gas prices vary due to world political events, supply and demand of
products, product storage levels, and weather patterns. We sell the vast majority of our production
at spot market prices. Accordingly, product price volatility will affect our cash flow from
operations. To mitigate price volatility we sometimes lock in prices for some portion of our
production through the use of financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to continue to make significant capital expenditures over the next several years as
part of our long-term growth strategy. We have budgeted $60&nbsp;million for capital expenditures in
2007. We project that we will spend $40&nbsp;million in the Gulf of Mexico and $20&nbsp;million on
onshore wells.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our exploratory drilling results in significant new discoveries, we will have to expend
additional capital in order to finance the completion, development, and potential additional
opportunities generated by our success. We believe that, because of the additional reserves
resulting from the successful wells and our record of reserve growth in recent years, we will be
able to access sufficient additional capital through additional bank financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has in place both a stock repurchase program and a limited partnership interest
repurchase program. Spending under these programs in 2006 was $7.8&nbsp;million. The Company expects to
expend a similar amount in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently maintains two credit facilities totaling $360&nbsp;million, with a combined
current borrowing base of $156.5&nbsp;million. The bank reviews the borrowing base semi-annually and,
at their discretion, may decrease or propose an increase to the borrowing base relative to a
redetermined estimate of proved oil and gas reserves. Our oil and gas properties are pledged as
collateral for the line of credit and we are subject to certain financial covenants defined in the
agreement. We are currently in compliance with these financial covenants. If we do not comply with
these covenants on a continuing basis, the lenders have the right to refuse to advance additional
funds under the facility and/or declare all principal and interest immediately due and payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is the goal of the Company to increase its oil and gas reserves and production through the
acquisition and development of oil and gas properties. The Company also continues to explore and
consider opportunities to further expand its oilfield servicing revenues through additional
investment in field service equipment. However, the majority of the Company&#146;s capital spending is
discretionary, and the ultimate level of expenditures will be dependent on the Company&#146;s assessment
of the oil and gas business environment, the number and quality of oil and gas prospects available,
the market for oilfield services, and oil and gas business opportunities in general.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Critical Accounting Estimates:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Proved Oil and Gas Reserves</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proved oil and gas reserves directly impact financial accounting estimates, including
depreciation, depletion and amortization. Proved reserves represent estimated quantities of natural
gas, crude oil, condensate, and natural gas liquids that geological and engineering data
demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs
under economic and operating conditions existing at the time the estimates were made. The process
of estimating quantities of proved oil and gas reserves is very complex, requiring significant
subjective decisions in the evaluation of all available geological, engineering and economic data
for each reservoir. The data
for a given reservoir may also change substantially over time as a result of numerous factors
including, but not
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">limited to, additional development activity, evolving production history and
continual reassessment of the viability of production under varying economic conditions.
Consequently, material revisions (upward or downward) to existing reserve estimates may occur from
time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Depreciation, Depletion and Amortization for Oil and Gas Properties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quantities of estimated proved oil and gas reserves are a significant component of our
calculation of depletion expense and revisions in such estimates may alter the rate of future
expense. Holding all other factors constant, if reserves were revised upward or downward, earnings
would increase or decrease respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation, depletion and amortization of the cost of proved oil and gas properties are
calculated using the unit-of-production method. The reserve base used to calculate depletion,
depreciation or amortization is the sum of proved developed reserves and proved undeveloped
reserves for leasehold acquisition costs and the cost to acquire proved properties. The reserve
base includes only proved developed reserves for lease and well equipment costs, which include
development costs and successful exploration drilling costs. Estimated future dismantlement,
restoration and abandonment costs, net of salvage values, are taken into account.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Repurchase of limited partners&#146; interests</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quantities of estimated proved oil and gas reserves are a significant component of the
calculation of amounts offered for partnership interests acquired pursuant to our repurchase
commitment. Revisions in such estimates may alter the amount of our future annual commitments.
Holding all other factors constant, if reserves were revised upward or downward, repurchase offer
amounts would increase or decrease respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Results of Operations: </B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2006 as compared to 2005</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $18,300,000 in 2006 as compared to $25,955,000 in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Oil and gas sales </I>were $61,924,000 in 2006 as compared to $53,988,000 in 2005. A chart
summarizing oil and gas production and revenue is presented below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Increase (Decrease)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barrels of Oil Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">379,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average Price Received (rounded)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,200,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mcf of Gas Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,695,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,758,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">937,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average Price Received (rounded)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(0.55</TD>
    <TD align="right">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,625,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,888,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,737,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Oil &#038; Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,924,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,936,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Changes in Production </I>are due to additional production from properties added during late 2005
and throughout 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Field Service Income </I>increased to $20,319,000 in 2006 from $15,182,000 in 2005. This increase
reflects higher utilization of equipment during 2006 combined with rate increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lease operating expenses </I>increased by 12% to $21,040,000 in 2006 as compared to $18,753,000 in
2005. The difference is attributable to costs on properties added during late 2005 and throughout
2006 and repairs made to marginal wells currently economic due to higher product price levels. This
increase also reflects the overall price increase in oil field services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General and administrative expenses </I>increased to $12,400,000 in 2006 as compared to
$10,493,000 in 2005, reflecting the increased ownership of the Partnerships combined with reduced
reimbursements from the Partnerships
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and increases in personnel costs and professional fees. The
$1,907,000 increase includes $1,313,000 representing the fair market value of subsidiary stock
issued to two key executives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Depreciation and depletion </I>of oil and gas properties increased to $14,437,000 in 2006 from
$10,125,000 in 2005. This increase reflects the increased production and cost basis of the
Company&#146;s properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exploration costs </I>of $1,162,000 were incurred during 2006. These costs include $588,000
related to the drilling of unsuccessful exploratory wells and $573,655 of certain geological,
geophysical and seismic costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense </I>increased to $2,091,000 in 2006 from $1,531,000 in 2005 due to increased
average outstanding debt combined with increased interest rates. The average interest rates paid on
outstanding borrowings subject to interest during 2006 and 2005 were 8.80% and 5.35% respectively.
As of December&nbsp;31, 2006 and 2005, the total outstanding borrowings were $136,460,000 and
$28,050,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income tax expense </I>of $10,210,000 in 2006 represents a 36% effective rate as compared to the
effective rate of 37% in 2005. At higher rates of income, the Company&#146;s percentage depletion
deductions, which are currently its only major permanent difference, become less significant as a
percentage of income. Current tax benefit in 2006 was $1,348,000 with the remainder being
attributable to an increase in the Company&#146;s deferred tax liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary reason that the Company&#146;s current federal tax expense for 2006 is below the
statutory rate is that the Company is allowed to deduct currently, rather than capitalize,
intangible drilling costs as incurred. The current deduction of these costs, which are capitalized
for financial accounting purposes, is also the primary reason for the increase in the Company&#146;s
deferred tax liability between 2006 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2005 as compared to 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had net income of $25,955,000 as compared to $7,275,000 in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Oil and gas sales </I>were $53,988,000 in 2005 as compared to $43,964,000 in 2004. A chart
summarizing oil and gas production and revenue is presented below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Increase (Decrease)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barrels of Oil Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average Price Received (rounded)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,006,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,094,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mcf of Gas Produced</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,758,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,138,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(380,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average Price Received (rounded)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,888,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,961,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,297,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Oil &#038; Gas Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,967,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,021,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Changes in Production </I>are due to additional production from properties added during 2004 and
2005 offset by the sale of offshore properties in August&nbsp;2005 (Partners transaction) and the
hurricanes in the third quarter of 2005. Hurricanes Katrina and Rita came ashore negatively
affecting our offshore production and to a lesser extent a portion of our onshore production. While
we did not incur any significant property damage as a result of either storm production during the
third quarter was shut-in for periods ranging from several days to a few weeks, primarily because
of a lack of power or because of flooding or damage to facilities receiving our production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Field Service Revenue </I>increased to $15,182,000 in 2005 from $11,965,000 in 2004. This increase
reflects higher utilization of equipment during 2005 combined with rate increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lease operating expenses </I>increased by 24% to $18,573,000 in 2005 as compared to $14,939,000 in
2004. The difference is attributable to production taxes related to higher prices combined with
costs on properties added during
2005 and repairs made to marginal wells currently economic due to higher product price levels.
This increase also reflects the overall price increase in oil field services.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General and administrative expenses </I>increased to $10,493,000 in 2005 as compared to $7,536,000
in 2004, reflecting the increased ownership of the Partnerships combined with reduced
reimbursements from the Partnerships and increases in personnel costs and professional fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Depreciation and depletion </I>of oil and gas properties decreased by 8% to $ 10,125,000 in 2005
from $11,021,000 in 2004. This decrease reflects the declining cost basis of the Company&#146;s onshore
properties combined with the sale of the offshore properties in August&nbsp;2005 (Partners transaction).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exploration costs </I>of $664,000 were incurred during 2005. These costs include $262,000 related
to the drilling of a dry hole in Oklahoma. Exploration costs in 2004 of $5,499,000 consist of dry
hole expenditures and certain geological, geophysical and seismic costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest expense </I>increased to $1,531,000 in 2005 from $1,136,000 in 2004 due to increased
average outstanding debt combined with increased interest rates. The average interest rates paid on
outstanding borrowings subject to interest during 2005 and 2004 were 5.35% and 3.91% respectively.
As of December&nbsp;31, 2005 and 2004, the total outstanding borrowings were $28,050,000 and
$29,900,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income tax expense </I>of $14,999,000 in 2005 represents a 37% effective rate as compared to the
effective rate of 29% in 2004. At higher rates of income, the Company&#146;s percentage depletion
deductions, which are currently its only major permanent difference, become less significant as a
percentage of income. Current tax expense in 2005 was $8,814,000 with the remainder being
attributable to an increase in the Company&#146;s deferred tax liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary reason that the Company&#146;s current federal tax expense for 2005 is below the
statutory rate is that the Company is allowed to deduct currently, rather than capitalize,
intangible drilling costs as incurred. The current deduction of these costs, which are capitalized
for financial accounting purposes, is also the primary reason for the increase in the Company&#146;s
deferred tax liability between 2005 and 2004.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is exposed to interest rate risk on its line of credit, which has variable rates
based upon the lenders base rate, as defined, and the London Inter-Bank Offered rate. Based on the
balance outstanding at December&nbsp;31, 2006, a hypothetical 2.5% increase in the applicable interest
rates would increase interest expense by approximately $1,285,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Derivative Instruments and Hedging Activity.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our hedging strategy is designed to reduce the risk of price volatility for our production in the
natural gas and crude oil markets. Our hedging arrangements apply to only a portion of our
production and provide only partial price protection. These hedging arrangements limit the benefit
to us of increases in prices, but offer protection in the event of price declines. Further, if our
counterparties defaulted, this protection might be limited as we might not receive the benefits of
the hedges. Please read the discussion below and note 11 of the Notes to Consolidated Financial
Statements for a more detailed discussion of our hedging arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Hedges on Production &#150; Collars.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we enter into natural gas and crude oil collar agreements with counterparties to
hedge price risk associated with a portion of our production. These cash flow hedges are not held
for trading purposes. Under the collar arrangements, if the index price rises above the ceiling
price, we pay the counterparty. If the index price falls below the floor price, the counterparty
pays us. In the case of a three-way collar if the index price rises above the third tier price,
the counterparty pays us.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Hedges on Production &#150; Swaps.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">From time to time, we enter into natural gas and crude oil swap agreements with counterparties to
hedge price risk associated with a portion of our production. These cash flow hedges are not held
for trading purposes. Under the swap agreements, if the index price rises above the swap price, we
pay the counterparty. If the index falls below the swap price, the counterparty pays us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, we had open crude oil price collar contracts covering our 2007 and 2008 production
as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Crude Oil Price Collar</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Volume</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Average Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Net Unrealized</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>In</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Floor/Ceiling/Third Tier</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Loss)/Gain</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contract Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Mbbl</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(per Bbl)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">65/ $79.25/ $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/ $79.25/ $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/ $79.25/ $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/ $79.25/ $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Full Year 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD nowrap align="right">65/  $79.25/  $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/  $79.25/  $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/  $79.25/  $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">65/  $79.25/  $100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Full Year 2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2006, we had open natural gas price swap contracts covering our 2007 and 2008
production as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Natural Gas Price Swaps</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Net Unrealized</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Volume</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gain</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contract Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>in Mmcf</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price (per Mcf)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(In thousands</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,287</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Full Year 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Full Year 2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to market risk on these open contracts, to the extent of changes in market prices of
natural gas and crude oil. However, the market risk exposure on these hedged contracts is
generally offset by the gain or loss recognized upon the ultimate sale of the commodity that is
hedged.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preceding paragraphs contain forward-looking information concerning future production and
projected gains and losses, which may be impacted both by production and by changes in future
market prices of energy commodities. See &#147;Forward-Looking Information&#148; for further details.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements and supplementary information included in this Report are described
in the Index to Financial Statements at Page F-1 of this Report.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9A. CONTROLS AND PROCEDURES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>(a)&nbsp;Evaluation of disclosure controls and procedures.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management, with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule
13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Annual
Report on Form 10-K. The evaluation included certain internal control areas in which we have made
and are continuing to make changes to improve and enhance controls. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. In addition, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints and that management is required to apply its
judgment in evaluating the benefits of possible controls and procedures relative to their costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on that evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective to provide reasonable assurance that
information we are required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated and communicated to
our management, including our chief executive officer and chief financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>(b)&nbsp;Changes in internal control over financial reporting.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no changes in our internal control over financial reporting that occurred during
the period covered by this Annual Report on Form 10-K that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management is currently in the process of comprehensively documenting and further analyzing
our system of internal control over financial reporting. We are in the process of designing
enhanced processes and controls to address any issues identified through this review. We plan to
continue this initiative as well as prepare for our first management report on internal control
over financial reporting, as required by Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 which may
result in changes to our internal control over financial reporting.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9B. OTHER INFORMATION.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to the Company&#146;s Directors, nominees for Directors and executive officers
is included in the Company&#146;s definitive proxy statement relating
to the Company&#146;s Annual Meeting of
Stockholders to be held in June, 2007, which will be filed with the U.S. Securities and Exchange
Commission within 120&nbsp;days of December&nbsp;31, 2006, and which is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. EXECUTIVE COMPENSATION.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to executive compensation is included in the Company&#146;s definitive proxy
statement relating to the Company&#146;s Annual Meeting of Stockholders to be held in June, 2007, which
will be filed with the U. S. Securities and Exchange Commission within 120&nbsp;days of December&nbsp;31,
2006, and which is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to security ownership of certain beneficial owners and management is
included in the Company&#146;s definitive proxy statement relating to
the Company&#146;s Annual Meeting of
Stockholders to be held in June, 2007, which will be filed with the U. S. Securities and Exchange
Commission within 120&nbsp;days of December&nbsp;31, 2006, and which is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to certain transactions by Directors and executive officers of the
Company is included in the Company&#146;s definitive proxy statement
relating to the Company&#146;s Annual
Meeting of Stockholders to be held in June, 2007, which will be filed with the U. S. Securities and
Exchange Commission within 120&nbsp;days of December&nbsp;31, 2006, and which is incorporated herein by
reference.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information relating to principal accountant fees and services is included in the Company&#146;s
definitive proxy statement relating to the Company&#146;s Annual Meeting of Stockholders to be held in
June, 2007, which will be filed with the U. S. Securities and Exchange Commission within 120&nbsp;days
of December&nbsp;31, 2006, and which is incorporated herein by reference.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following documents are filed as part of this Report:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Financial statements (Index to Financial Statements at page F-1 of this Report)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;Financial Statement Schedules (Index to Financial Statements &#150; Supplementary Information at
page F-1 of this Report)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Exhibits:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restated Certificate of Incorporation of PrimeEnergy Corporation
(Incorporated by reference to Exhibit&nbsp;3.1 of PrimeEnergy
Corporation Form&nbsp;10-K for the year ended December&nbsp;31, 2004)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws of PrimeEnergy Corporation (Incorporated by reference to
Exhibit&nbsp;3.2 of PrimeEnergy Corporation Form&nbsp;10-K for the year ended
December&nbsp;31, 2004)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Adoption Agreement #003 dated 4/23/2002, MassMutual Life Insurance
Company Flexinvest Prototype Non-Standardized 401(k) Profit-Sharing
Plan; EGTRRA Amendment to the PrimeEnergy employees 401(k) Savings
Plan; MassMutual Retirement Services Flexinvest Defined
Contribution Prototype Plan; Protected Benefit Addendum; Addendum
to the Administrative Services Agreement Loan Agreement; Addendum
to Administrative Services Agreement GUST Restatement Provisions;
General Trust Agreement (Incorporated by reference to Exhibit
10.3.1 of PrimeEnergy Corporation Form&nbsp;10-K for the year ended
December&nbsp;31, 2002) (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the PrimeEnergy Corporation Employees 401(k) Savings
Plan (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Agreement of Limited Partnership, FWOE
Partners L.P., dated as of August&nbsp;22, 2005 (Incorporated by
reference to Exhibit&nbsp;10.3 of PrimeEnergy Corporation Form&nbsp;8-K for
events of August&nbsp;22, 2005)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contribution Agreement between F-W Oil Exploration L.L.C. and FWOE
Partners L.P. dated as of August&nbsp;22, 2005 (Incorporated by
reference to exhibit 10.4 of PrimeEnergy Corporation Form&nbsp;8-K for
events of August&nbsp;22, 2005)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Composite copy of Non-Statutory Option Agreements (Incorporated by
reference to Exhibit&nbsp;10.18 of PrimeEnergy Corporation Form&nbsp;10-K for
the year ended December&nbsp;31, 2004) (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Credit Agreement among PrimeEnergy
Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern Oil Well Service
Company, Southwest Oilfield Construction Company, EOWS Midland
Company and Guaranty Bank, FSB as Agent and Letter of Credit Issuer
and BNP Paribas, as Co-Documentation Agent and JPMorgan Chase Bank,
N.A., as Co-Documentation Agent and the Lenders Signatory hereto,
December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22.5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter from BNP Paribas regarding Amended and Restated Credit Agreement effective as of
December&nbsp;28, 2006, among PrimeEnergy Corporation, et al, and Guaranty Bank, FSB (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement between
PrimeEnergy Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern
Oil Well Service Company, Southwest Oilfield Construction Company,
EOWS Midland Company, (debtor) and
Guaranty Bank, FSB as
Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement (Membership Pledge) by PrimeEnergy Corporation in favor of Guaranty Bank, FSB
as
Agent December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement between
PrimeEnergy Corporation, PrimeEnergy Management Corporation, Prime Operating Company, Eastern
Oil Well Service Company, Southwest Oilfield Construction Company,
EOWS Midland Company, (debtor) and
Guaranty Bank, FSB as
Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement between Eastern
Oil Well Service Company, EOWS Midland Company,(debtor) and Guaranty
Bank, FSB as
Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement between Eastern Oil Well Service
Company, EOWS Midland Company,(debtor) and Guaranty Bank, FSB as
Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement between
Southwest Oilfield Construction Company, (debtor) and Guaranty Bank,
FSB as Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Security Agreement effective between EOWS
Midland Company, (debtor) and Guaranty Bank, FSB as
Agent (secured party) December 28, 2006 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated as of June&nbsp;1, 2006 (but effective for all purposes as of August&nbsp;22,
2005), between Prime Offshore L.L.C. as Borrower and PrimeEnergy
Corporation as Lender (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated June&nbsp;29, 2006 between Prime Offshore L.L.C. and Guaranty
Bank, FSB as Agent and a Lender (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subordination Agreement effective as of June&nbsp;29, 2006, between Prime Offshore L.L.C.,
PrimeEnergy Corporation, and Guaranty Bank, FSB (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement effective June&nbsp;29, 2006 between Prime Offshore L.L.C., and
Guaranty Bank, FSB (debtor) and Guaranty Bank, FSB as Agent (secured
party) (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of
Production effective as of June&nbsp;29, 2006, from Prime Offshore L.L.C. and Guaranty Bank, FSB
(filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pledge Agreement as of June&nbsp;29, 2006, between Guaranty Bank, FSB and Prime
Offshore L.L.C. (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Completion and Liquidity Maintenance Agreement effective as of June&nbsp;29, 2006, between
PrimeEnergy Corporation, Guaranty Bank, FSB, and Prime Offshore, L.L.C. (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Put Right Agreement effective as of June&nbsp;29, 2006, by and among PrimeEnergy Corporation and
Prime Offshore L.L.C. (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PrimeEnergy Corporation Code of
Business Conduct and Ethics (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Ryder Scott &#038; Company L.P. (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer pursuant to
Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as amended (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer pursuant to
Rule 13(a)-14(a)/15d-14(a) of the Securities Exchange Act of 1934,
as amended (filed herewith)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section&nbsp;1350, adopted pursuant to Section&nbsp;906 of the
Sarbanes-OxleyAct of 2002 (filed herewith)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section&nbsp;1350, adopted pursuant to Section&nbsp;906 of the
Sarbanes-OxleyAct of 2002 (filed herewith)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 0pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>


<TR style="font-size: 6pt">
    <TD colspan="3"><DIV style="border-bottom: 1px solid #000000; width: 18%">&nbsp;</DIV></TD>
</TR>


<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan or arrangement required to be filed as an Exhibit to
this Form&nbsp;10-K</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 30th day of March, 2007.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">PrimeEnergy Corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ CHARLES E. DRIMAL, JR
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Charles E. Drimal, Jr.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Registrant and in the capacities indicated
and on the 30th day of March, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ C<FONT style="font-variant: SMALL-CAPS">HARLES</FONT> E.DRIMAL, JR.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Charles E. Drimal, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and President;
The Principal Executive Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ BEVERLY A. CUMMINGS
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Beverly A. Cummings
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Vice President and
Treasurer; The Principal
Financial and Accounting Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ MATTHIAS ECKENSTEIN
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Matthias Eckenstein
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ H. GIFFORD FONG
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
H. Gifford Fong
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ THOMAS S.T. GIMBEL
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Thomas S.T. Gimbel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ CLINT HURT
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Clint Hurt
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JAN K. SMEETS
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jan K. Smeets
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets &#151; December&nbsp;31, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#302">Consolidated Statements of Operations &#151; for the years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#303">Consolidated Statement of Stockholders&#146; Equity &#151; for the years ended December&nbsp;31, 2006, 2005
and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows &#151; for the years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#305">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#306">Supplementary Information:</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#307">Capitalized Costs Relating to Oil and Gas Producing Activities, years ended December&nbsp;31,
2006, 2005 and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#308">Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development
Activities, years ended December&nbsp;31, 2006, 2005 and 2005
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#309">Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas
Reserves, years ended December&nbsp;31, 2006, 2005 and 2004
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#310">Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating
to Proved Oil an Gas Reserves, years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#311">Reserve Quantity Information, years ended December&nbsp;31, 2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#312">Results of Operations from Oil and Gas Producing Activities, years ended December&nbsp;31,
2006, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><A href="#313">Notes to Supplementary Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-25</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-1 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="RIGHT" style="font-size: 10pt; margin-top: 6pt">[PP&#38;C
LOGO]<BR>[PUSTORINO,<BR>PUGLISI<BR>&#38;
CO., LLP<BR>CERTIFIED PUBLIC ACCOUNTANTS<BR>515 MADISON AVENUE<BR>NEW
YORK, NEW YORK 10022<BR>(212) 832-1110 FAX&nbsp;&nbsp;&nbsp;&nbsp;(212) 755-6748]</DIV>


<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PrimeEnergy Corporation and Subsidiaries:

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of PrimeEnergy Corporation and
Subsidiaries (the Corporation) as of December&nbsp;31, 2006 and 2005, and the related consolidated
statements of operations, stockholders&#146; equity, and cash flows for the years ended December&nbsp;31,
2006, 2005 and 2004. These financial statements are the responsibility of the Corporation&#146;s
management. Our responsibility is to express an opinion on these financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of PrimeEnergy Corporation and Subsidiaries as of
December&nbsp;31, 2006 and 2005, and the consolidated results of its operations and cash flows for the
years ended December&nbsp;31, 2006, 2005 and 2004 in conformity with accounting principles generally
accepted in the United States of America.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PUSTORINO, PUGLISI &#038; CO., LLP<BR>
New York, New York<BR>
March&nbsp;30, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED BALANCE SHEETS, December&nbsp;31, 2006 and 2005

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,119,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,528,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,797,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,970,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,558,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">655,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,269,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,517,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Derivative contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,085,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,521,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">454,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,818,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, at cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proved oil and gas properties at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284,698,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,248,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unproved oil and gas properties at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,166,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less, accumulated depletion and depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(78,005,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,234,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,740,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,180,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Field and office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,793,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,450,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less, accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,351,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,484,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,442,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,966,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total net property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,146,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">419,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">291,592,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">109,383,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of the consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-3 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED BALANCE SHEETS, December&nbsp;31, 2006 and 2005

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LIABILITIES and STOCKHOLDERS&#146; EQUITY:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,658,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,642,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of asset retirement and
other long-term obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of deferred taxes liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,961,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,606,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,027,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,440,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,521,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term bank debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,460,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,050,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset retirement obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,314,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,216,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,367,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,860,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,581,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,647,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,313,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock, $.10 par value,
authorized 5,000,000 shares; none issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.10 par value, authorized
10,000,000 shares; issued 7,694,970 in
2006 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Paid in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,908,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,608,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,677,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,401,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock, at cost 4,478,145 common
shares in 2006 and 4,367,155 in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,979,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,665,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,698,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,736,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">291,592,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">109,383,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of the consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-4 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENTS of OPERATIONS

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">for the years ended December&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,924,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,967,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Field service income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,965,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Administrative overhead fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,704,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,068,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,317,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on derivative instruments, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(415,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,419,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,946,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,428,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lease operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,040,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,573,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,939,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Field service expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,796,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,791,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,939,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation, depletion and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,274,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,156,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,493,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,536,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exploration costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,499,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,835,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,795,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,069,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,584,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,151,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,359,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income and expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,091,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,531,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,136,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add gain on sale and exchange of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,017,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,334,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,954,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,298,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,999,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,023,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of the consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-5 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENT of STOCKHOLDERS&#146; EQUITY

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">for the years ended December&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Paid In</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,378,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,735,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,436,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased 136,977 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,474,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,474,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,209,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,237,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased 164,410 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,456,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,456,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,608,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20,655,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,736,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchased 110,990 shares of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,314,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,314,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income,
net of taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,976,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31,
2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">769,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,024,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,908,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(27,979,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,698,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of the consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-6 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CONSOLIDATED STATEMENT of CASH FLOWS

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">for the years ended December&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income to net cash
provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation, depletion, amortization and accretion
on discounted liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,437,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,274,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,156,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dry hole and abandonment costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,499,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on sale of properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,017,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,334,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,313,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,557,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,230,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,358,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,411,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,803,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,586,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(985,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,133,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,435,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,181,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(139,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(137,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,716,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,510,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,016,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,450,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,385,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(276,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in due to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(552,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(333,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,982,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,605,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,995,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures, including exploration expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,345,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,440,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,696,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of properties and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,017,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,796,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118,328,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,644,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,621,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of stock for treasury</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,314,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,456,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,474,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in long-term bank debt and other long-term
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,362,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,570,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,522,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of long-term bank debt and other long-term
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(91,168,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,432,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,837,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,880,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,318,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,534,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,643,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,585,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,476,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,891,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,119,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,476,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosures:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes paid during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,713,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,076,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income tax refunds received during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">172,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest paid during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,091,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,531,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">953,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of the consolidated financial statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-7 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>
<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Description of Operations and Significant Accounting Policies</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Nature of Operations</I>:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PrimeEnergy Corporation (&#147;PEC&#148;), a Delaware corporation, was organized in March&nbsp;1973. The
Company is engaged in the development, acquisition and production of oil and natural gas
properties. The Company owns leasehold, mineral and royalty interests in producing and
non-producing oil and gas properties across the United States, including Colorado, Kansas,
Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Texas, Utah, West
Virginia and Wyoming and the Gulf of Mexico. The Company operates 1,545 wells and owns
non-operating interests in over 856 additional wells. Additionally, the Company provides
well-servicing support operations, site-preparation and construction services for oil and gas
drilling and reworking operations, both in connection with the Company&#146;s activities and
providing contract services for third parties. The Company is publicly traded on the NASDAQ
under the symbol &#147;PNRG&#148;. PEC owns Eastern Oil Well Service Company (&#147;EOWSC&#148;), EOWS Midland
Company (&#147;EMID&#148;) and Southwest Oilfield Construction Company (&#147;SOCC&#148;), all of which perform oil
and gas field servicing. PEC also owns Prime Operating Company (&#147;POC&#148;), which serves as operator
for most of the producing oil and gas properties owned by the Company and affiliated entities.
PEC also owns Prime Offshore L.L.C. (Prime Offshore) formerly F-W Oil Exploration LLC, which
owns and operates properties in the Gulf of Mexico. PrimeEnergy Corporation and its subsidiaries
are herein referred to as the &#147;Company.&#148; PrimeEnergy Management Corporation (&#147;PEMC&#148;), a
wholly-owned subsidiary, acts as the managing general partner, providing administration,
accounting and tax preparation services for 18 limited partnerships and 2 trusts (collectively,
the &#147;Partnerships&#148;). The markets for the Company&#146;s products are highly competitive, as oil and
gas are commodity products and prices depend upon numerous factors beyond the control of the
Company, such as economic, political and regulatory developments and competition from
alternative energy sources.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Consolidation and Presentation</I>:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements include the accounts of PrimeEnergy Corporation, its
subsidiaries and the Partnerships, using the proportionate consolidation method, whereby our
proportionate share of each entity&#146;s assets, liabilities, revenue and expenses are included in
the appropriate classifications in the consolidated financial statements. Inter-company
balances and transactions are eliminated in preparing the consolidated financial statements.
These reclassifications had no effect on the Company&#146;s net income (loss)&nbsp;or stockholders&#146;
equity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Use of Estimates:</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimates of oil and gas reserves, as determined by independent petroleum engineers, are
continually subject to revision based on price, production history and other factors. Depletion
expense, which is computed based on the units of production method, could be significantly
impacted by changes in such estimates. Additionally, FAS 144 requires that if the expected
future cash flow from an asset is less than its carrying cost, that asset must be written down
to its fair market value. As the fair market value of an oil and gas property will usually be
significantly less than the total future net revenue expected from that property, small changes
in the estimated future net revenue from an asset could lead to the necessity of recording a
significant impairment of that asset.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-8 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Property and Equipment:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company follows the &#147;successful efforts&#148; method of accounting for its oil and gas
properties. Under the successful efforts method, costs of acquiring undeveloped oil and gas
leasehold acreage, including lease bonuses, brokers&#146; fees and other related costs are
capitalized. Provisions for impairment of undeveloped oil and gas leases are based on periodic
evaluations. Annual lease rentals and exploration expenses, including geological and geophysical
expenses and exploratory dry hole costs, are charged against income as incurred. Costs of
drilling and equipping productive wells, including development dry holes and related production
facilities, are capitalized. All other property and equipment are carried at cost. Depreciation
and depletion of oil and gas production equipment and properties are determined under the
unit-of-production method based on estimated proved developed recoverable oil and gas reserves.
Depreciation of all other equipment is determined under the straight-line method using various
rates based on useful lives. The cost of assets and related accumulated depreciation is removed
from the accounts when such assets are disposed of, and any related gains or losses are
reflected in current earnings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Capitalization of Interest:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Interest costs related to financing major oil and gas projects in progress are capitalized until
the projects are evaluated or until the projects are substantially complete and ready for their
intended use if the projects are evaluated and successful.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Impairment of Long-Lived Assets:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company reviews Long-Lived Assets, including oil and gas properties, for impairment whenever
events or changes in circumstances indicate that the carrying amounts may not be recovered. If
the carrying amounts are not expected to be recovered by undiscounted cash flows, the assets are
impaired and an impairment loss is recorded. The amount of impairment is based on the estimated
fair value of the assets determined by discounting anticipated future net cash flows. The amount
of impairment of oil and gas properties was $29,000 and $1,809,000
recorded for the periods ended December&nbsp;31, 2006 and 2005, respectively, and is included in the results of operations in depreciation, depletion and
amortization.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Asset Retirement Obligation:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective January&nbsp;1, 2003, the Company adopted SFAS No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>. Our asset retirement obligation primarily represents the estimated present value of
the amount the Company will incur to plug, abandon and remediate our producing properties
(including removal of our offshore platforms) at the end of their productive lives, in
accordance with applicable state laws. The Company determined its asset retirement obligation by
calculating the present value of estimated cash flows related to the liability. The retirement
obligation is recorded as a liability at its estimated present value as of the asset&#146;s
inception, with an offsetting increase to producing properties. Periodic accretion of discount
of the estimated liability is recorded as an expense in the income statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Income Taxes:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company records income taxes in accordance with Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;109, &#147;Accounting for Income Taxes.&#148; SFAS No.&nbsp;109 is an asset and liability approach
to accounting for income taxes, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been recognized in the
Company&#146;s financial statements or tax returns.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-9 <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Deferred tax liabilities or assets are established for temporary differences between financial
and tax reporting bases and are subsequently adjusted to reflect changes in the rates expected
to be in effect when the temporary differences reverse. A valuation allowance is established for
any deferred tax asset for which realization is not likely.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>General and Administrative Expenses:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">General and administrative expenses represent costs and expenses associated with the operation
of the Company. Certain of the Partnerships sponsored by the Company reimburse general and
administrative expenses incurred on their behalf.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Income Per Common Share:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Income per share of common stock has been computed based on the weighted average number of
common shares outstanding during the respective periods in accordance with SFAS No.&nbsp;128,
&#147;Earnings per Share&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Statements of cash flows:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For purposes of the consolidated statements of cash flows, the Company considers short-term,
highly liquid investments with original maturities of less than ninety days to be cash
equivalents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Concentration of Credit Risk:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company maintains significant banking relationships with financial institutions in the State
of Texas. The Company limits its risk by periodically evaluating the relative credit standing of
these financial institutions. The Company&#146;s oil and gas production purchasers consist primarily
of independent marketers and major gas pipeline companies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Hedging:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company periodically enters into oil and gas financial instruments to manage its exposure to
oil and gas price volatility. The oil and gas reference prices upon which the price hedging
instruments are based reflect various market indices that have a high degree of historical
correlation with actual prices received by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The financial instruments are accounted for in accordance with Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148;, which
established new accounting and reporting requirements for derivative instruments and hedging
activities. SFAS No.&nbsp;133, as amended by SFAS No.&nbsp;138 and 149 requires that all derivative
instruments subject to the requirements of the statement be measured at fair market value and
recognized as assets or liabilities in the balance sheet. The accounting for changes in the fair
value of a derivative depends on the intended use of the derivative and the resulting
designation is generally established at the inception of a derivative. For derivatives
designated as cash flow hedges and meeting the effectiveness guidelines of SFAS No.&nbsp;133, changes
in fair value, to the extent effective, are recognized in other comprehensive income until the
hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based
on the relative changes in fair value between the derivative contract and the hedged item over
time. Any change in fair value of a derivative resulting from ineffectiveness or an excluded
component of the gain/loss is recognized immediately in the statement of operations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-10 <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Recently Issued Accounting Pronouncements</I>:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In February&nbsp;2006, the Financial Accounting Standards Board (FASB)&nbsp;issued SFAS No.&nbsp;155
&#147;Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No.&nbsp;133 and
140.&#148; SFAS No.&nbsp;155 amends SFAS No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging
Activities&#148; and SFAS No.&nbsp;140, &#147;Accounting for Transfers for Servicing of Financial Assets and
Extinguishments of Liabilities,&#148; and also resolves issues addressed in SFAS No.&nbsp;133
Implementation Issue No.&nbsp;D1, &#147;Application of Statement 133 to Beneficial Interests in
Securitized Financial Assets.&#148; SFAS No.&nbsp;155 was issued to eliminate the exemption from applying
SFAS No.&nbsp;133 to interests in securitized financial assets so that similar instruments are
accounted for in a similar fashion, regardless of the instrument&#146;s form. The Company does not
believe that its financial position, results of operations or cash flows will be impacted by
SFAS No.&nbsp;155 as the Company does not currently hold any hybrid financial instruments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In July&nbsp;2006, the FASB issued FASB Interpretation (FIN)&nbsp;No.&nbsp;48, &#147;Accounting for Uncertainty in
Income Taxes-an interpretation of FASB Statement No.&nbsp;109.&#148; This interpretation provides guidance
for recognizing and measuring uncertain tax positions, as defined in SFAS NO. 109, &#147;Accounting
for Income Taxes&#148;. FIN NO. 48 prescribes a two-step process for accounting for income tax
uncertainties. First, a threshold condition of &#147;more likely than not&#148; should be met to determine
whether any of the benefit of the uncertain tax position should be recognized in the financial
statements. If the recognition threshold is met, FIN 48 provides additional guidance on
measuring the amount of the uncertain tax position. Guidance is also provided regarding
derecognition, classification, interest and penalties, interim period accounting, transition and
disclosure of these uncertain tax positions. This Interpretation is effective for fiscal years
beginning after December&nbsp;15, 2006, and we will adopt it in the first quarter of 2007. We do not
expect the adoption of Interpretation No.&nbsp;48 to have a material impact on our financial
statements and related disclosures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, &#147;Fair Value Measurements,&#148; which establishes a
formal framework for measuring fair values of assets and liabilities in financial statements
that are already required by U.S. generally accepted accounting principles (GAAP)&nbsp;to be measured
at fair value. SFAS No.&nbsp;157 clarifies guidance in FASB Concepts Statement (CON)&nbsp;NO. 7 which
discusses present value techniques in measuring fair value. Additional disclosures are also
required for transactions measured at fair value. No new fair value measurements are
prescribed, and SFAS No.&nbsp;157 is intended to codify the several definitions of fair value
included in various accounting standards. However, the application of this Statement may change
current practices for certain companies. SFAS No.&nbsp;157 is effective for fiscal years beginning
after November&nbsp;15, 2007. The Company is currently evaluating what impact SFAS No.&nbsp;157 may have
on its financial position, results of operations or cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In September&nbsp;2006, the FASB issued No.&nbsp;158, &#147;Employers&#146; Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No.&nbsp;87, 88, 106 and 132(R).&#148;
SFAS No.&nbsp;158 requires recognition of the funded status of a benefit plan in the Company&#146;s
balance sheet and the recognition through other comprehensive income of gains, losses, prior
service costs and credits, net of tax, arising during the period but not included as a component
of periodic benefit cost. In addition, the measurement date of plan assets and obligations must
be the Company&#146;s balance sheet date. Additional disclosures in the notes to the financial
statements will also be required and guidance is prescribed regarding the selection of discount
rates to be used in measuring the benefit obligation. For public companies, the effective date
of SFAS No.&nbsp;158 is as of the end of the fiscal year ending after December&nbsp;15, 2006. The
effective date of new measurement date provision is for fiscal years ending after December&nbsp;15,
2008. The Company does not believe that its financial position, results of operations or cash
flows will be impacted by SFAS No.&nbsp;158 as the Company does not currently have defined benefit
pension or post retirement plans.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In September&nbsp;2006, the SEC Staff issued Staff Accounting Bulletin (SAB)&nbsp;No.&nbsp;108, &#147;Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements,&#148; in an effort
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11 <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to address diversity in the accounting practices of quantifying misstatements and the potential
for improper amounts on the balance sheet. Prior to the issuance of SAB No.&nbsp;108, the two
methods used for quantifying the effects of financial statement errors were the &#147;roll-over&#148; and
&#147;iron curtain&#148; methods. Under the &#147;roll-over&#148; method, the primary focus is the income statement,
including the reversing effect of prior year misstatements. The criticism of this method is
that misstatements can accumulate on the balance sheet. On the other hand, the &#147;iron curtain&#148;
method focuses on the effect of correcting the ending balance sheet, with less importance on the
reversing effects of prior year errors in the income statement. SAB No.&nbsp;108 establishes a &#147;dual
approach&#148; which requires the quantification of the effect of financial statement errors on each
financial statement, as well as related disclosures&#146;. Public companies are required to record
the cumulative effect of initially adopting the &#147;dual approach&#148; method in the first year ending
after November&nbsp;16, 2006 by recording any necessary corrections to asset and liability balances
with an offsetting adjustment to the opening balance of retained earnings. The use of this
cumulative effect transition method also requires detailed disclosures of the nature and amount
of each error being corrected and how and when they arose. The Company is currently evaluating
the impact SAB No.&nbsp;108 may have on its financial position, results of operations and cash flows.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In February&nbsp;2007, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No.&nbsp;159, &#147;<I>The Fair Value Option for Financial Assets and Financial
Liabilities</I>&#148; (&#147;SFAS 159&#148;). This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. This statement expands the use of fair value
measurement and applies to entities that elect the fair value option. The fair value option
established by this Statement permits all entities to choose to measure eligible items at fair
value at specified election dates. SFAS 159 is effective as of the beginning of an entity&#146;s
first fiscal year that begins after November&nbsp;15, 2007. We have not determined the effect, if
any, the adoption of this statement will have on our financial position or results of operations
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Significant Acquisitions and Dispositions</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As more fully described in Note 7, the Company is committed to offer to repurchase the interests
of the partners and trust unit holders in certain of the Partnerships. The Company purchased
such interests in an amount totaling $526,000 in 2006, $1,217,000 in 2005. The Company&#146;s
proportionate share of assets, liabilities and results of operations related to the interests in the Partnerships are included in the
consolidated financial statements.
</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2005, the Company completed a transaction involving its interests in certain offshore
Gulf of Mexico properties effective April&nbsp;1, 2005 (the &#147;Partners transaction&#148;). Prime Offshore
L.L.C. (Prime Offshore) formerly, F-W Oil Exploration L.L.C., a subsidiary of the Company,
entered into a limited partnership agreement (the &#147;Partners Agreement&#148;), wherein Prime Offshore
is the General Partner of FWOE Partners L.P. (&#147;Partners&#148;) formed for the acquisition,
development and operation of oil and gas properties and pipelines, equipment, facilities and
fixtures appurtenant thereto, in off-shore Gulf of Mexico (the &#147;Properties&#148;). Prior to entering
into the Partners Agreement, Prime Offshore had distributed interests in the Properties to the
minority shareholders of Prime Offshore and the Company purchased all of the outstanding shares
of such minority shareholders for $250,000, resulting in the Company&#146;s 100% ownership of Prime
Offshore.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Prime Offshore contributed all of its interest in the Properties to Partners in exchange for an
initial 20% General Partner interest in Partners and a cash distribution of $43.2&nbsp;million.
Partners purchased the interests previously distributed to the former minority shareholders for
$27.7&nbsp;million. The entire $70.9&nbsp;million expended by Partners was funded by a cash contribution
by the Limited Partner. The cash distribution includes adjustments for estimated net revenues
from the effective date of April&nbsp;1, 2005, estimated capital expenditures and other typical
closing adjustments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2005, the Company completed the sale of certain leasehold and exploration rights in
prospects generated in the Company&#146;s onshore Texas 2-d Seismic Exploration Program in exchange
for a cash payment of $3.5&nbsp;million.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-12 <!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Additional Balance Sheet Information</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounts receivable at December&nbsp;31, 2006 and 2005, consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joint interest billing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,054,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,904,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,367,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,922,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,764,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,183,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,023,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,912,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,154,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,163,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(605,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">32,970,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,558,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accrued Liabilities at December&nbsp;31, 2006 and 2005,
consisted of the following:</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation
and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,584,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,632,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,188,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,961,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,606,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Property and Equipment</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total interest costs incurred during 2006 was $4,555,000. Of this amount, the Company
capitalized $2,464,000. Capitalized interest is included as part of the cost of oil and gas
properties. The capitalized rates are based upon the Company&#146;s weighted-average cost of
borrowings used to finance the expenditures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Long-Term Bank Debt &#151; Debt</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company currently has credit facilities totaling $360&nbsp;million, consisting of a $200&nbsp;million
credit facility through Guaranty Bank (the offshore facility) and a $160&nbsp;million credit facility
through a syndicate of banks led by Guaranty Bank (the onshore facility). The credit facilities
mature in 2008 and 2009 . Availability under the credit facilities is based on the loan value
assigned to Prime&#146;s oil and gas properties. At December&nbsp;31, 2006, the borrowing bases and
outstanding balances were $82&nbsp;million under the onshore credit facility at a weighted average
interest rate of 8.18%, and $54.5&nbsp;million under the offshore credit facility at a weighted
average interest rate of 10.15%. Currently, the borrowing base and outstanding balance under
the onshore credit facility is $82&nbsp;million and $72&nbsp;million, respectively, and the borrowing
base and outstanding balance under the offshore credit facility is $74.5&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The determination of the Borrowing Base is made by the lenders taking into consideration the
estimated value of Prime&#146;s oil and gas properties in accordance with the lenders&#146; customary
practices for oil and gas loans. This process involves reviewing Prime&#146;s estimated proved
reserves and their valuation. The Borrowing Base is redetermined semi-annually, and the
available borrowing amount could be increased or decreased as a result of such redeterminations.
In addition, Prime and the lenders each have discretion at any time to have the Borrowing Base
redetermined. A revision to Prime&#146;s reserves may prompt such a request on the part of the
lenders, which could possibly result in a reduction in the Borrowing Base and availability under
the credit facilities. If outstanding borrowings under either of the credit facilities exceed
the applicable portion of the Borrowing Base, Prime would be required to repay the excess
amount within a prescribed period. If we are unable to pay the excess amount, it would cause an
event of default.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The credit facilities include terms and covenants that require the Company to maintain, as
defined, a minimum current ratio, tangible net worth, debt coverage ratio and interest coverage
ratio, and restrictions are placed on the payment of dividends and the amount of treasury stock
the Company may purchase.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-13 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The credit facilities are collateralized by substantially all of the Company&#146;s assets. The
Company is required to mortgage, and grant a security interest in, consolidated proved oil and
gas properties. Prime also pledged the stock of several subsidiaries to the lenders to secure
the credit facilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Commitments</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Operating Leases:</I></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has several noncancelable operating leases, primarily for rental of office
space, that have a term of more than one year. The future minimum lease payment for the
operating leases are as follows.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Operating</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leases</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">553,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">525,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,637,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><I>Asset Retirement Obligation:</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A reconciliation of our liability for plugging and abandonment costs for the years ended
December&nbsp;31, 2006 and 2005 is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset retirement obligation &#151; beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,594,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">390,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,033,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,456,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities settled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(348,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accretion expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revisions in estimated liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,036,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">784,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset retirement obligation &#151; end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,440,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,594,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s liability is determined using significant assumptions, including current estimates
of plugging and abandonment costs, annual inflation of these costs, the productive life of wells
and our risk-adjusted interest rate. Changes in any of these assumptions can result in
significant revisions to the estimated asset retirement obligation. Revisions to the asset
retirement obligation are recorded with an offsetting change to producing properties, resulting
in prospective changes to depreciation, depletion and amortization expense and accretion of
discount. Because of the subjectivity of assumptions and the relatively long life of most of our
wells, the costs to ultimately retire our wells may vary significantly from previous estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Contingent Liabilities</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company, as managing general partner of the affiliated Partnerships, is responsible for all
Partnership activities, including the drilling of development wells and the production and sale
of oil and gas from productive wells. The Company also provides the administration, accounting
and tax preparation work for the Partnerships, and is liable for all debts and liabilities of
the affiliated Partnerships, to the extent that the assets of a given limited Partnership are
not sufficient to satisfy its obligations. As of December&nbsp;31, 2006, the affiliated Partnerships
have established cash reserves in excess of their debts and liabilities and the Company believes
these reserves will be sufficient to satisfy Partnership obligations.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-14 <!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued<BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is subject to environmental laws and regulations. Management believes that future
expenses, before recoveries from third parties, if any, will not have a material effect on the
Company&#146;s financial condition. This opinion is based on expenses incurred to date for
remediation and compliance with laws and regulations which have not been material to the
Company&#146;s results of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a general partner, the Company is committed to offer to purchase the limited partners&#146;
interest in certain of its managed Partnerships at various annual intervals. Under the terms of
a partnership agreement, the Company is not obligated to purchase an amount greater than 10% of
the total partnership interest outstanding. In addition, the Company will be obligated to
purchase interests tendered by the limited partners only to the extent of one hundred fifty
percent of the revenues received by it from such partnership in the previous year. Purchase
prices are based upon annual reserve reports of independent petroleum engineering firms
discounted by a risk factor. Based upon historical production rates and prices, management
estimates that if all such offers were to be accepted, the maximum annual future purchase
commitment would be less than $500,000.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company owns approximately a 27% interest in a limited partnership which owns a shopping
center in Alabama. The Company is a guarantor on a mortgage secured by the shopping center. The
Company believes the cash flow from the center is sufficient to service the mortgage. The market
value of the center is currently substantially higher than the balance owed on the mortgage. If
the partnership were unable to pay its obligations under the mortgage agreement, the maximum
amount the Company is committed to pay is $50,000.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Stock Options and Other Compensation</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In May&nbsp;1989, non-statutory stock options were granted by the Company to four key executive
officers for the purchase of shares of common stock. At December&nbsp;31, 2006 and 2005, options on
767,500 shares were outstanding and exercisable at prices ranging from $1.00 to $1.25.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Income Taxes</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The components of the provision for income taxes for the years ended December&nbsp;31, 2006, 2005
and 2004 are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,814,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,011,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">187,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,429,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,074,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">803,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">756,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,999,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,023,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The components of net deferred tax assets and liabilities are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Compensation and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">226,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">308,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">455,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on hedging transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,270,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net current deferred tax liability (Asset)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,962,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(455,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Alternative minimum tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,328,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net Operating Loss Carryfowards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">903,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Percentage Depletion Carryfowards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total noncurrent assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,582,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basis differences relating to partnerships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,213,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">835,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depletion and depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,639,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,025,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on hedging transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,860,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net noncurrent deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,366,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,860,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The total provision for income taxes for the years ended December&nbsp;31, 2006, 2005 and 2004
varies from the federal statutory tax rate as a result of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,693,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,013,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,501,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income tax, net of
federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,029,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Percentage depletion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(352,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(429,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(811,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">542,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(84,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(81,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(170,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,999,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,023,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deferred income taxes reflect the impact of temporary differences between the amount of assets
and liabilities recognized for financial reporting purposes and such amounts recognized for tax
purposes. Differences relating to oil and gas properties owned through Prime Offshore are
reflected under &#147;Depletion and Depreciation&#148;, while basis differences relating to the managed
partnerships are reflected under &#147;Basis differences relating to managed partnerships&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Due primarily to the current deduction of intangible drilling costs, the company will have a
federal net operating loss (NOL)&nbsp;in 2006, which will be carried back to the 2004 and 2005 tax
years resulting in a refund of $2,623,000. As intangible drilling costs are a preference item
for the alternative minimum tax (AMT), the Company will have a current year liability based on
the AMT. Absent the NOL carryback, the Company would have a current federal income tax expense
of $809,000. The result of combining these amounts is a current tax benefit of $1,814,000.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The NOL carryback to 2004 and 2005 will reduce the Company&#146;s regular tax to zero, so that the
remaining liability for those years will be based solely on the amount of the AMT. The Company
will get AMT credit carryforwards for the amount of such liability.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2006, $2,366,000 of deferred tax relating to unrealized gains on hedging transactions was
charged directly to shareholder&#146;s equity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is entitled to percentage depletion on certain of its wells, which is calculated
without reference to the basis of the property. To the extent that such depletion exceeds a
property&#146;s basis, it creates a permanent difference which lowers the Company&#146;s effective rate.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Segment Information and Major Customers</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company operates in one industry &#151; oil and gas exploration, development, operation and
servicing. The Company&#146;s oil and gas activities are entirely in the United States.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company sells its oil and gas production to a number of purchasers. Listed below are the
percent of the Company&#146;s total oil and gas sales made to each of the customers whose purchases
represented more than 10% of the Company&#146;s oil and gas sales in the year 2006.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:8pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil Purchasers:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas Purchasers:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Texon Distributing L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unimark LLC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">25</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plains All American Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cokinos Energy Corporation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TEPPCO Crude Oil, L.L.C.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Although there are no long-term oil and gas purchasing agreements with these purchasers, the
Company believes that they will continue to purchase its oil and gas products and, if not, could
be replaced by other purchasers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Derivative Instruments and Hedging Activity</B></U><B>:</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company periodically enters into derivative commodity instruments to hedge its exposure
to price fluctuations on natural gas and crude oil production. At December&nbsp;31, 2006, the
Company had three cash flow hedges open: two natural gas price swap arrangements and one crude
oil collar arrangement. At December&nbsp;31, 2006, $6.34&nbsp;million
($3.98&nbsp;million net of tax) unrealized
gain was recorded in Accumulated Other Comprehensive Income, along with a $6.08&nbsp;million
short-term derivative receivable and a $260,000 thousand long-term derivative receivable. The
change in the fair value of derivatives designated as hedges that is effective is initially
recorded to Accumulated Other Comprehensive Income. The ineffective portion, if any, of the
change in the fair value of derivatives designated as hedges, and the change in fair value of
all other derivatives, is recorded currently in earnings as a component of oil and gas sales.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2006, natural gas price swaps cover 3,080 Mmcf of production at a weighted
average price of $9.22. The oil price three-way collar covers 206
Mbbl of production at a floor price
of $65.00, a ceiling of $79.25 and a third-tier call of $100.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assuming no change in commodity prices, after December&nbsp;31, 2006, the Company would expect
to reclassify to the Statement of Operations, over the next 12&nbsp;months, $3.89&nbsp;million in
after-tax income associated with commodity hedges. This reclassification represents the net
short-term receivable associated with open positions currently not reflected in earnings at
December&nbsp;31, 2006 related to anticipated 2007 production.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Related Party Transactions</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PEMC acts as the managing general partner, providing administration, accounting and tax
preparation services for the Partnerships. Certain directors have limited and general
partnership interests in several of these Partnerships. As the managing general partner in each
of the Partnerships, PEMC receives approximately 5% to 15% of the net revenues of each
Partnership as a carried interest in the Partnerships&#146; properties. As more fully described in
Note 7, the Company is committed to offer to repurchase the interests of the partners and trust
unit holders in certain of the Partnerships. The Company purchased such interests in an amount
totaling $526,000 in 2006 and $1,217,000 in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Partnership agreements allow PEMC to receive reimbursement for property acquisition and
development costs and general and administrative overhead, incurred on behalf of the
Partnerships.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Due to related parties at December&nbsp;31, 2006 and 2005, primarily represents receipts collected
by the Company as agent, for oil and gas sales net of expenses. The amount of such receipts
payable to the affiliated Partnerships was $477,000 and $1,246,000 at December&nbsp;31, 2006 and
2005, respectively. Receivables from related parties consist of reimbursable general and
administrative costs, lease operating expenses and reimbursements for property development, and
related costs. Due from related parties was $655,000 and $985,000 as of December&nbsp;31, 2006 and
2005 respectively. Treasury stock purchases in 2006 and 2005 included shares acquired from
related parties. Purchases from related parties include a total of 40,259 shares purchased for
a total consideration of $2,623,564 in 2006 and 92,432 shares purchased for a total
consideration of $2,098,640 in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During 2005, the Company purchased certain equipment from a managing member of FWOE Exploration
L.L.C. for $1,200,000.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Restricted Cash and Cash Equivalents</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Restricted cash and cash equivalents includes $2,526,000 and $1,797,000 at December&nbsp;31, 2006
and 2005, respectively, of cash primarily pertaining to unclaimed royalty payments. There were
corresponding accounts payable recorded at December&nbsp;31, 2006 and 2005 for these liabilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Salary Deferral Plan</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company maintains a salary deferral plan (the &#147;Plan&#148;) in accordance with Internal Revenue
Code Section&nbsp;401(k), as amended. The Plan provides for discretionary and matching contributions
which approximated $366,000 and $319,500 in 2006 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>15.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Earnings per Share</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Basic earnings per share are computed by dividing earnings available to common stockholders by
the weighted average number of common shares outstanding during the period. Diluted earnings
per share reflect per share amounts that would have resulted if dilutive potential common stock
had been converted to common stock. The following reconciles amounts reported in the financial
statements:</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to CONSOLIDATED FINANCIAL STATEMENTS, Continued

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Per share</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Net Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,314,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,069,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Per share</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Net Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,397,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">742,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,955,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,140,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31, 2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Per share</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Net Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,569,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">722,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,292,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>16.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Selected Quarterly Financial Information (Unaudited)</B></U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">21,177,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">24,842,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">24,331,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,752,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,879,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,050,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7,704,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,951,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,393,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,609,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,320,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,978,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.74</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.02</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.61</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.60</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.64</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.31</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">.98</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="right" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,967,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">19,293,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">17,595,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">16,091,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9,344,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,426,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,293,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,088,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,827,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14,554,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,315,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,259,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Net income per
common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.02</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">4.32</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.68</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.65</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.65</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">3.54</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.56</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">0.54</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRIMEENERGY CORPORATION and SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SUPPLEMENTARY INFORMATION</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION and SUBSIDIARIES

</DIV>
<DIV align="left">
<A name="307"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CAPITALIZED COSTS RELATING to OIL and GAS PRODUCING ACTIVITIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Developed oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">284,698,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">125,248,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">95,018,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Undeveloped oil and gas properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,166,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,149,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,745,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,414,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,167,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated depreciation, depletion
and valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,005,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,234,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,098,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net capitalized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">281,740,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,069,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="308"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">COSTS INCURRED in OIL and GAS PROPERTY ACQUISITION,
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">EXPLORATION and DEVELOPMENT ACTIVITIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Years ended December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Properties Developed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,569,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,038,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Undeveloped</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,047,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,166,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,058,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exploration Costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,429,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">664,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,499,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development Costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">135,609,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,745,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,101,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to supplementary information.

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="309"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">STANDARDIZED MEASURE of DISCOUNTED FUTURE<BR>
NET CASH FLOWS RELATING to PROVED OIL and GAS RESERVES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Years ended December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future cash inflows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">641,744,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">618,621,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">378,639,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future production and
development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(267,243,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(256,672,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,155,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future income tax expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
       <TD align="right">(86,915,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(109,571,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,819,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future net cash flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD align="right">287,586,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252,378,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,665,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10% annual discount for
estimated timing of cash flow</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(88,963,000</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,899,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54,254,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standardized measure of
discounted future net cash flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
        <TD align="right">198,623,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">145,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to supplementary information.

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="310"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">STANDARDIZED MEASURE of DISCOUNTED FUTURE<BR>
NET CASH FLOWS and CHANGES THEREIN<BR>
RELATING to PROVED OIL and GAS RESERVES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Years
ended December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following are the principal sources of change in the standardized measure of discounted future
net cash flows during 2006, 2005 and 2004:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>For Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales of oil and gas produced, net
of production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(40,884,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(35,415,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29,028,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net changes in prices and production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">(55,367,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,729,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,178,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extensions, discoveries and improved
recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">147,292,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,792,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revisions of previous quantity estimates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">(1,742,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,060,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,904,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserves purchased, net of development
costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">383,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">927,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,238,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change in development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">1,870,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,914,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserves sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,246,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accretion of discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">20,855,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,391,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,459,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change in income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">(13,427,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,567,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,656,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in production rates (timing)&nbsp;and
other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">(5,836,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change</DIV></TD>
    <TD align="left">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD align="right">53,144,000</TD>
    <TD nowrap>&nbsp;</TD>


    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,068,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,159,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standardized measure of discounted future
net cash flow:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="right">145,479,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,252,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">198,623,000</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">145,479,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to supplementary information.

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="311"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">RESERVE QUANTITY INFORMATION

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Years
ended December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Oil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gas</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(bbls.)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(bbls.)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(bbls.)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Mcf)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved developed
and undeveloped
reserves:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,687,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,944,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,932,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,870,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,905,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,005,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extensions,
discoveries and
improved recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">812,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,394,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,087,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,268,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revisions of
previous estimates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,602,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,929,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,806,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">929,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserves sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,701,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(379,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(5,695,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,758,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(371,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,138,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,228,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,233,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,687,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,944,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,932,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,870,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proved developed
reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,009,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,754,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,504,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,728,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to supplementary information.

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="312"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">RESULTS of OPERATIONS from OIL and GAS PRODUCING ACTIVITIES

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Years
ended December&nbsp;31, 2006, 2005 and 2004

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Oil and gas sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,924,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,988,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">43,967,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Lease operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,040,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,573,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,939,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exploration costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,162,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,499,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and
Depletion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,771,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,021,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,652,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,604,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,023,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,625,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,966,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,482,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Results of operations from
producing activities
(excluding corporate
overhead and interest costs)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,022,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,485,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to supplementary information.

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PRIMEENERGY CORPORATION and SUBSIDIARIES
</DIV>

<DIV align="left">
<A name="313"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">NOTES to SUPPLEMENTARY INFORMATION

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Presentation of Reserve Disclosure Information</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reserve disclosure information is presented in accordance with the provisions of Statement of
Financial Accounting Standards No.&nbsp;69 (&#147;SFAS 69&#148;), &#147;Disclosures About Oil and Gas Producing
Activities&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Determination of Proved Reserves</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The estimates of the Company&#146;s proved reserves were determined by an independent petroleum
engineer in accordance with the provisions of SFAS 69. The estimates of proved reserves are
inherently imprecise and are continually subject to revision based on production history,
results of additional exploration and development and other factors. Estimated future net
revenues were computed by reserves, less estimated future development and production costs
based on current costs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Results of Operations from Oil and Gas Producing Activities</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The results of operations from oil and gas producing activities were prepared in accordance
with the provisions of SFASW 69. General and administrative expenses, interest costs and other
unrelated costs are not deducted in computing results of operations from oil and gas
activities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to
Proved Oil and Gas Reserves</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The standardized measure of discounted future net cash flows relating to proved oil and gas
reserves and the changes of standardized measure of discounted future net cash flows relating
to proved oil and gas reserves were prepared in accordance with the provisions of SFAS 69.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future cash inflows are computed as described in Note 2 by applying current prices to year-end
quantities of proved reserves.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future production and development costs are computed estimating the expenditures to be incurred
in developing and producing the oil and gas reserves at year-end, based on year-end costs and
assuming continuation of existing economic conditions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future income tax expenses are calculated by applying the year-end U.S. tax rate to future
pre-tax cash inflows relating to proved oil and gas reserves, less the tax basis of properties
involved. Future income tax expenses give effect to permanent differences and tax credits and
allowances relating to the proved oil and gas reserves.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future net cash flows are discounted at a rate of 10% annually (pursuant to SFAS 69) to derive
the standardized measure of discounted future net cash flows. This calculation does not
necessarily represent an estimate of fair market value or the present value of such cash flows
since future prices and costs can vary substantially from year-end and the use of a 10%
discount figure is arbitrary.</TD>
</TR>

</TABLE>
</DIV>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3.2
<SEQUENCE>2
<FILENAME>d44173exv10w3w2.htm
<DESCRIPTION>FIRST AMENDMENT TO THE 401(K) SAVINGS PLAN
<TEXT>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.3.2
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 6pt">8618-1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FIRST AMENDMENT TO THE
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PRIMEENERGY CORPORATION EMPLOYEES 401(K) SAVINGS PLAN

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This FIRST AMENDMENT to the PrimeEnergy Corporation Employees 401(k) Savings Plan is executed by
PrimeEnergy Corporation, EOWS Midland Company, Eastern Oil Well Service Company, Prime Operating
Company, Southwest Oilfield Construction Company, PrimeEnergy Management Corporation, and Prime
Offshore LLC the Employers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The purpose of this Amendment is to reflect the merger of Prime Offshore LLC Plan, to add Safe
Harbor plan provisions, to add an Adopting Employer, to add the Automatic Enrollment provision, to
change the eligibility requirements, entry date, increase salary deferral limit, and to change
In-Service Withdrawals of Employer contributions. Furthermore, it is the Company&#146;s intention to
grandfather the eligibility provision of 6&nbsp;months of service for those employees employed on or
before December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">RESOLVED, that Adoption Agreement Section&nbsp;B(2), Plan Information &#151; Effective Date, be amended by
<B><I>adding the election of Item&nbsp;B(2)(d), This is a merger of two previously established qualified plans
known as PrimeEnergy Corporation Employees 401(k)&nbsp;Savings Plan and Prime Offshore LLC 401(k) Plan
originally effective January&nbsp;1, 1989 and January&nbsp;1, 2002, respectively. This amendment and
restatement plan shall be effective as of January&nbsp;1, 2007.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;C(l), Eligibility Requirements &#151; Eligible
Employees (Plan Section&nbsp;1.18), be amended by changing Item&nbsp;C(l)(b)(7), The following are excluded:
Other: all except employees of PrimeEnergy Corp., PrimeEnergy Management Corp., Prime Operating
Co., Eastern Oil Well Service Company, Southwest Oilfield Construction Company, and EOWS Midland
Company, to Item&nbsp;C(l)(b)(7), The following are excluded: Other: all except employees of Prime
Energy Corp., PrimeEnergy Management Corp., Prime Operating Co., Eastern Oil Well Service Company,
Southwest Oilfield Construction Company, EOWS Midland Company and <B><I>Prime Offshore LLC.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;C(2), Eligibility Requirements &#151; Affiliated
Employers (Plan Section&nbsp;1.6), be amended by <B>adding to the List of Participating Employers as
follows: </B>Item&nbsp;C(2)(b) <B><I>Prime Offshore LLC, Taxpayer Identification Number: 76-0688905</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;C(3), Eligibility Requirements &#151; Conditions of
Eligibility (Plan Section&nbsp;3.1), be amended by <B>changing the election</B> of Item&nbsp;C(3)(b)(2), Any
Eligible Employee will be eligible to participate in the Plan upon completion of 1/2 Year of
Service or Period of Service, <B><I>to Item&nbsp;C(3)(b)(3), Any Eligible Employee will be eligible to
participate in the Plan upon completion of 1 Year of Service or Period of Service.</I></B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 0pt">8618-1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;C(4), Eligibility Requirements &#151; Entry Date
(Effective Date of Participation) (Plan Section&nbsp;3.2), be amended by <B>changing the election </B>of Item
C(4)(b), An Eligible Employee who has satisfied the eligibility requirements will become a
Participant for all purposes of the Plan the first day of the month coinciding with or next
following the date on which such requirements are satisfied, <B><I>to Item&nbsp;G(4)(d), An Eligible Employee
who has satisfied the eligibility requirements will become a Participant for all purposes of the
Plan the earlier of the first day of the seventh month or the first day of the Plan Year coinciding
with or next following the date on which such requirements are satisfied.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;D(l), Service &#151; Recognition of Service with
Predecessor Employer (Plan Sections&nbsp;1.61 and 1.91), be amended by <B>changing the election </B>of Item
D(l)(a), No service with a predecessor employer shall be recognized, <B><I>to Item&nbsp;D(1)(b)(1), Service
with Prime Offshore, LLC will be recognized with no limitations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(l), Contributions and Allocations &#151; Salary Reduction
Arrangement &#151; Elective Deferrals (Plan Section&nbsp;12.2), be amended by
<B>changing the election </B>of Item&nbsp;G(1)(b), Each Participant may elect to have Compensation
deferred by up to 15%, <B><I>to Item&nbsp;G(1)(a), Each Participant may elect to have Compensation
deferred by up to the maximum percentage allowable not to exceed the limits of Code Section
401(k), 402(g), 404 and 415.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(1), Contributions and Allocations &#151; Automatic
Enrollment, be amended by <B>changing the election </B>of Item&nbsp;G(1)(o), Shall
Participants who do not affirmatively elect to receive cash or have a specified amount
contributed to the Plan automatically have Compensation reduced? No., <B><I>to Item&nbsp;G(1)(p), Shall
Participants who do not affirmatively elect to receive the cash or have a specified amount
contributed to the Plan automatically have Compensation reduced? Yes, by 4% of
Compensation, provided that such enrollment is permissible under the laws of the state in
which the Participants are employed in.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(2), Contribution and Allocations &#151; 401(k) Safe
Harbor Plan Provisions (Plan Section&nbsp;12.8), be amended by <B>changing the election </B>of Item&nbsp;G(2)(a),
Will the ADP and/or ACP test safe harbor provisions be used? No., <B><I>to Item&nbsp;G(2)(b), Will the ADP
and/or ACP test safe harbor provisions be used? Yes, but only the ADP Test Safe Harbor provisions
will be used.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(2), Contribution and Allocations &#151; 401(k) Safe
Harbor Plan Provisions (Plan Section&nbsp;12.8) &#151; ADP Test Safe Harbor Contribution,
be amended by <B><I>adding the election of Item&nbsp;G(2)(d)(2)(a), The Employer will make an
Enhanced Matching Contribution. The Employer will make Matching Contributions to the
account of each &#147;Eligible Participant&#148; in an amount equal to the sum of 100% of the
Participant&#146;s Elective Deferrals that do not exceed 4% of the Participant&#146;s Compensation.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and by <B>further electing:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Item&nbsp;G(2)(d)(3)(b), The safe harbor matching contribution will be made each payroll period.</I></B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 0pt">8618-1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Item&nbsp;G(2)(f)(5), For purposes of the ADP Test Safe Harbor contribution, the term &#147;Eligible
Participant&#148; means any Participant who is eligible to make Elective Deferrals. The ADP and/or ACP
Test Safe Harbor provisions are effective for the Plan Year beginning January&nbsp;1, 2007.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(3), Contribution and Allocations &#151; Formula for
Determining Employer Matching Contributions (Plan Section&nbsp;12.1 (a)(2)), be
amended <B>by removing the election </B>of Item&nbsp;G(3)(b)(1) &#038; (5), The Employer may make
matching contributions equal to a discretionary percentage, to be determined by the Employer, of
the Participant&#146;s Elective Deferrals, AND, in determining the matching contribution, a
discretionary percentage of a Participant&#146;s Compensation or a discretionary dollar amount, the
percentage or dollar amount to be determined by the Employer on a uniform basis to all
Participants will be matched.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and by <B>further removing:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G(3)(g), Matching contributions will be determined based on Elective Deferrals made each
payroll period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G(3)(j), There is no dollar limit imposed on the matching contribution made on behalf of any
Participant for any Plan Year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G(3)(l), Matching contributions will be made on behalf of all Participants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G(3)(n), The matching contributions will not be qualified matching contributions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;G(4), Contribution and Allocations &#151; Requirements
for the allocation of Matching Contributions, be amended <B>by removing the election </B>of
Item&nbsp;G(4)(b), No service requirement for Participants who are <U>actively</U> employed
at the end of the Plan Year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and by <B>further removing:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">G(4)(g), Participants who are <U>not</U> actively employed at the end of the Plan Year will
share in such allocations, regardless of service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;H(7), Distributions &#151; In-Service Distributions
(Plan Section&nbsp;6.10), be amended by <B>changing the election </B>of Item&nbsp;H(7)(b)(2)(a), In-service
distributions may be made to a Participant who has not separated from service from Participant&#146;s
accounts attributable to Employer matching and profit sharing contributions provided the
Participant has attained age 70<SUP style="font-size: 85%; vertical-align: text-top">1</SUP>/<SUP style="font-size: 85%; vertical-align: text-BOTTOM">2</SUP><I>, </I><B><I>to Item&nbsp;H(7)(b)(2)(a), In-service distributions may be made to
a Participant who has not separated from service from Participant&#146;s accounts attributable to
Employer matching and profit sharing contributions provided the Participant has attained age 59<SUP style="font-size: 85%; vertical-align: text-top">1</SUP>/<SUP style="font-size: 85%; vertical-align: text-BOTTOM">2</SUP>.</I></B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that Adoption Agreement Section&nbsp;I(2), Nondiscrimination Testing &#151; ADP and ACP
Tests (Plan Sections&nbsp;12.4 and 12.6), be amended by <B>changing the election </B>of Item&nbsp;I(2)(b), Prior
Year Testing Election: The prior year ratio will be used for the ADP and ACP tests, <B><I>to Item
I(2)(a), </I></B><B><I>N/A. </I></B><B><I>This plan satisfies the ADP and ACP Test Safe Harbor rules by making a Basic Matching
Contribution or an Enhanced Matching Contribution for all Plan Years beginning on or after the
Effective Date of the Plan, or in the case of an amendment and restatement, for all Plan Years to
which the amendment and restatement relates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FURTHER RESOLVED, that the effective date of this Amendment shall be January&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this <U>29</U> day of <U>November</U>, <U>2006</U>.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">PrimeEnergy Corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">EOWS Midland Company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Eastern Oil Well Service Company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Prime Operating Company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Southwest Oilfield Construction Company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">PrimeEnergy Management Corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Prime Offshore LLC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Virginia Crowe Forese</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
For the Employer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
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</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22.5
<SEQUENCE>3
<FILENAME>d44173exv10w22w5.htm
<DESCRIPTION>AMENDED AND RESTATED CREDIT AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w22w5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.22.5
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED CREDIT AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AMONG</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT CORPORATION<BR>
PRIME OPERATING COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY<BR>
SOUTHWEST OILFIELD CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB<BR>
AS AGENT AND LETTER OF CREDIT ISSUER</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BNP PARIBAS,<BR>
AS CO-DOCUMENTATION AGENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>JPMORGAN CHASE BANK, N.A.,<BR>
AS CO-DOCUMENTATION AGENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>THE LENDERS SIGNATORY HERETO</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REVOLVING LINE OF CREDIT OF UP TO $150,000,000<BR>
REVOLVING LINE OF CREDIT OF UP TO $10,000,000</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 12pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE I DEFINITIONS AND INTERPRETATION</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">2&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">1.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporation of Exhibits
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE II TERMS OF FACILITIES</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter of Credit Facility
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Use of Loan Proceeds and Letters of Credit
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">22</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">22</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Repayment of Loans and Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">22</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outstanding Amounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">23</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Time, Place, and Method of Payments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">23</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pro Rata Treatment; Adjustments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">23</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Borrowing Base Determinations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">24</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mandatory Prepayments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">25</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voluntary Prepayments and Conversions of Loans
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">25</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commitment Fee
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">25</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter of Credit Fee
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loans to Satisfy Obligations of Borrower
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Interest in Accounts; Right of Offset
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Provisions Relating to Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Yield Protection
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">27</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Types of Loans
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Illegality
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">30</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.20</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regulatory Change
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">30</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitations on Interest Periods
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.22</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letters in Lieu of Transfer Orders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">2.23</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE III CONDITIONS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Receipt of Loan Documents and Other Items
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Each Loan and Letter of Credit
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE IV REPRESENTATIONS AND WARRANTIES</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Authorization
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Existence
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Valid and Binding Obligations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Instruments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Assets
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Misstatements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liabilities, Litigation, and Restrictions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorizations; Consents
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Laws
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ERISA
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Laws
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Federal Reserve Regulations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment Company Act Compliance
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proper Filing of Tax Returns; Payment of Taxes Due
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refunds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas Contracts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Casualties or Taking of Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Locations of Borrower
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.20</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">4.21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE V AFFIRMATIVE COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance and Access to Records
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quarterly Financial Statements; Compliance Certificates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Annual Financial Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oil and Gas Reserve Reports
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title Opinions; Title Defects; Mortgaged Property
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices of Certain Events
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letters in Lieu of Transfer Orders; Division Orders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Information
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Laws
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Assessments and Charges
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Corporate Existence and Good Standing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Notes; Performance of Obligations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Initial Fees and Expenses of Counsel to Agent
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsequent Fees and Expenses of Agent and Lenders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Operation of Oil and Gas Properties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance and Inspection of Properties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Insurance
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNIFICATION
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">5.20</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Partnership Debt
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE VI NEGATIVE COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indebtedness
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contingent Obligations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liens
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales of Assets
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leasebacks
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loans or Advances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dividends and Distributions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Issuance of Stock; Changes in Corporate Structure
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transactions with Affiliates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lines of Business
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ERISA Compliance
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest Coverage Ratio
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Current Ratio
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Net Worth
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bank Debt Coverage Ratio
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE VII EVENTS OF DEFAULT</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">7.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Enumeration of Events of Default
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">7.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Remedies
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE VIII THE AGENT</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments and Waivers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delegation of Duties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exculpatory Provisions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Reliance by Agent
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Default
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-Reliance on Agent and Other Lenders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNIFICATION
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restitution
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agent in Its Individual Capacity
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Successor Agent
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Applicable Parties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">8.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Co-Documentation Agents
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">ARTICLE IX MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignments; Participations
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations, Warranties, and Covenants
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights of Third Parties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Renewals; Extensions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Rights Cumulative
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival Upon Unenforceability
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments; Waivers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Controlling Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GOVERNING LAW
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">JURISDICTION AND VENUE
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WAIVER OF RIGHTS TO JURY TRIAL
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENTIRE AGREEMENT
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">USA Patriot Act Notice
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- iii -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Confidentiality
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">60</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">9.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Instruments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="9" valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#091;Remainder of Page Intentionally Left Blank&#093;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>LIST OF EXHIBITS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;I
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Note</TD>
</TR>
<TR valign="bottom">

<TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;I (A)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Revolving Line of Credit Note Number 2</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;II
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Borrowing Request</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;III
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Compliance Certificate</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;IV
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility Amounts</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;V
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disclosures</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;VI
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Assignment Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- iv -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED CREDIT AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS CREDIT AGREEMENT </B>is made and entered into this 28<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of December,
2006, by and between <B>PRIMEENERGY CORPORATION, </B>a Delaware corporation (&#147;<U>PEC</U>&#148;), <B>PRIMEENERGY</B>
<B>MANAGEMENT</B> <B>CORPORATION, </B>a New York corporation, <B>PRIME OPERATING COMPANY, </B>a Texas corporation,
<B>EASTERN OIL WELL SERVICE COMPANY, </B>a West Virginia corporation, <B>SOUTHWEST OILFIELD CONSTRUCTION
COMPANY, </B>an Oklahoma corporation, and <B>EOWS MIDLAND COMPANY, </B>a Texas corporation (collectively, the
&#147;<U>Borrower</U>&#148;), with each other lender that is a signatory hereto or becomes a signatory hereto as
provided in Section&nbsp;9.1, (individually, together with its successors and assigns, a &#147;<U>Lender</U>&#148; and
collectively together, with their respective successors and assigns, the &#147;<U>Lenders</U>&#148;) and <B>GUARANTY
BANK, FSB, </B>a federal savings bank, as agent for the Lenders (in such capacity, together with its
successors in such capacity pursuant to the terms hereof, the &#147;<U>Agent</U>&#148;) and Letter of Credit Issuer
and <B>BNP PARIBAS </B>as Co-Documentation Agent and <B>JPMORGAN CHASE BANK, </B><B>N.A.</B> as Co-Documentation Agent.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>W</B></U> <U><B>I</B></U> <U><B>T</B></U> <U><B>N</B></U> <U><B>E</B></U> <U><B>S</B></U> <U><B>S</B></U> <U><B>E</B></U> <U><B>T</B></U> <U><B>H</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the above named parties did execute and exchange counterparts of that certain Credit
Agreement dated December&nbsp;19, 2002, as amended by First Amendment to Credit Agreement dated
effective as of June&nbsp;1, 2003, as further amended by Second Amendment to Credit Agreement dated
effective as of September&nbsp;22, 2003, as further amended by Third Amendment to Credit Agreement
dated effective as of February&nbsp;17, 2004, as further amended by Fourth Amendment to Credit
Agreement dated December&nbsp;28, 2004, as further amended by Fifth Amendment to Credit Agreement dated
March&nbsp;18, 2005, as further amended by Sixth Amendment to Credit Agreement dated June&nbsp;6, 2006, and
as further amended by Letter Amendments to Credit Agreement dated August&nbsp;4, 2005, December&nbsp;16,
2005 and May&nbsp;12, 2006 (the &#147;<U>Existing Agreement</U>&#148;), to which reference is here made for all
purposes;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the parties subject to and bound by the Existing Agreement are desirous of amending
and restating the Existing Agreement in the particulars hereinafter set forth and hereinafter
referred to as the &#147;<U>Agreement</U>&#148;;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties to the
Agreement, as set forth therein, and the mutual covenants and agreements of the parties hereto,
the parties hereto agree as follows, amending and restating in its entirety the Existing
Agreement:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE I </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above.</U> As used herein, the terms &#147;<U>Agent</U>,&#148; &#147;<U>Agreement</U>,&#148;
&#147;<U>Borrower</U>,&#148; &#147;<U>Existing Agreement</U>,&#148; &#147;<U>Lender</U>&#148; and &#147;<U>Lenders</U>&#148; shall have the meaning assigned to them
hereinabove.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Additional Defined Terms.</U> As used in this Agreement, each of the following terms
shall have the meaning assigned thereto in this Section, unless the context otherwise requires:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Additional Costs</U>&#148; shall mean costs which the Lenders determine are
attributable to their obligation to make or their making or maintaining any LIBO
Rate Loan, or any reduction in any amount receivable by the Lenders in respect of
any such obligation or any LIBO Rate Loan, resulting from any Regulatory Change
which (a)&nbsp;changes the basis of taxation of any amounts payable to the Lenders under
this Agreement or the Note in respect of any LIBO Rate Loan (other than taxes
imposed on the overall net income of the Lenders), (b)&nbsp;imposes or modifies any
reserve, special deposit, minimum capital, capital rates, or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, the Lender (including LIBO Rate Loans and Dollar deposits in
the London interbank market in connection with LIBO Rate Loans), or any commitments
of the Lenders hereunder, (c)&nbsp;increases the Assessment Rate, or (d)&nbsp;imposes any
other condition affecting this Agreement or any of such extensions of credit,
liabilities, or commitments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Adjusted LIBO Rate</U>&#148; shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the sum of the LIBO Rate for such Loan plus
the Applicable Margin, but in no event exceeding the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; shall mean any Person directly or indirectly controlling, or under
common control with, the Borrower and includes any Subsidiary of the Borrower and
any &#147;affiliate&#148; of the Borrower within the meaning of Reg. &#167;240.12b-2 of the
Securities Exchange Act of 1934, as amended, with &#147;control,&#148; as used in this
definition, meaning possession, directly or indirectly, of the power to direct or
cause the direction of management, policies or action through ownership of voting
securities, contract, voting trust, or membership in management or in the group
appointing or electing management or otherwise through formal or informal
arrangements or business relationships.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Agreement</U>&#148; shall mean this Amended and Restated Credit Agreement, as it may
be amended, supplemented, or restated from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Lending Office</U>&#148; shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated for such
type of Loan on the signature pages hereof or such other office of the Lender (or an
affiliate of the Lender) as the Lender may from time to time specify to the Borrower
as the office by which Loans of such type are to be made and maintained.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Margin</U>&#148; shall mean as to each LIBO Rate Loan the LIBO Rate
plus 2.00% on all Loans hereunder.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Assessment Rate</U>&#148; shall mean, for any Interest Period, the average rate (rounded
upwards if necessary to the nearest 1/100 of 1%) charged by the Federal Deposit Insurance
Corporation (or any successor thereto) to the Agent for deposit insurance for Dollar time deposits
with the Agent at the Principal Office during such Interest Period, as determined by the Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Assignment Agreement</U>&#148; shall mean an Assignment Agreement, substantially in the form
of <U>Exhibit&nbsp;VI</U>, with appropriate insertions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Available Commitment</U>&#148; shall mean, at any time, an amount equal to the remainder, if
any, of (a)&nbsp;the sum of the Borrowing Base in effect at such time plus the Revolving Line of Credit
Number 2 Loan Available Commitment minus (b)&nbsp;the sum of the Loan Balance at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Bank Debt</U>&#148; shall mean the Loans owed under this Agreement by the Borrower to the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Base Rate</U>&#148; shall mean, at any time, the rate of interest per annum then most recently
established by the Agent as its base rate, which rate may not be the lowest rate of interest
charged by the Agent to its borrowers. Each change in any interest rate provided for herein based
upon the Base Rate resulting from a change in the Base Rate shall take effect without notice to the
Borrower at the time of such change in the Base Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Benefitted Lender</U>&#148; shall have the meaning assigned to such term in <U>Section
2.8(c).</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Base</U>&#148; shall mean, at any time, the amount determined by the Lenders in accordance
with Section&nbsp;2.9 and then in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Request</U>&#148; shall mean each written request, in substantially the form
attached hereto as Exhibit&nbsp;II, by the Borrower to the Agent for a borrowing, conversion, or
prepayment pursuant to Sections&nbsp;2.1 or 2.11, each of which shall:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) be signed by a Responsible Officer of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) when requesting a borrowing, be accompanied by a Compliance Certificate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) specify the amount and type of Loan requested, and, as applicable, the Loan to be converted or prepaid and the date of
the borrowing, conversion, or prepayment (which shall be a Business Day);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) when requesting a Floating Rate Loan, be delivered to the Agent no later than 5:00 p.m., Central Standard or Daylight
Savings Time, as the case may be, on the Business Day preceding the day of the requested borrowing, conversion, or prepayment;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) when requesting a LIBO Rate Loan, be delivered to the Agent no later than 10:00&nbsp;a.m., Central Standard or Daylight Savings Time, as the case may be,
three Business Days preceding the requested borrowing, conversion, or prepayment and designate the Interest Period requested with respect to such Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; shall mean (a)&nbsp;for all purposes other than as covered by clause (b)&nbsp;of this
definition, a day other than a Saturday, Sunday, legal holiday for commercial banks under the laws
of the State of Texas, or any other day when banking is suspended in the State of Texas, and (b)
with respect to all requests, notices, and determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is a Business Day described in clause (a)
of this definition and which is a day for trading by and between banks for Dollar deposits in the
London interbank market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Change in Control</U>&#148; means (a)&nbsp;the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of equity
interests representing more than 51% of the aggregate ordinary voting power represented by the
issued and outstanding Equity Interests of the Borrower or (b)&nbsp;occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Borrower by Persons who were
neither (i)&nbsp;nominated by the board of directors of the Borrower nor (ii)&nbsp;appointed by directors so
nominated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Date</U>&#148; shall mean the effective date of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Code</U>&#148; shall mean the United States Internal Revenue Code of 1986, as amended from time to
time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall mean the Mortgaged Properties and any other Property now or at any time
used or intended as security for the payment or performance of all or any portion of the
Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment</U>&#148; shall mean the obligation of the Lenders, subject to applicable provisions of
this Agreement, to make Loans to or for the benefit of the Borrower pursuant to Section&nbsp;2.1 and to
issue Letters of Credit pursuant to Section&nbsp;2.2.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Amount</U>&#148; shall mean, subject to the applicable provisions of this
Agreement, at any time, the lesser of (a)&nbsp;the sum of the Facility Amounts of the Lenders, or (b)
the Borrowing Base in effect at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Fee</U>&#148; shall mean each fee payable to the Agent for the benefit of the
Lenders by the Borrower pursuant to Section&nbsp;2.12.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Period</U>&#148; shall mean the period from and including the Closing Date to but
not including the Commitment Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Termination Date</U>&#148; shall mean March&nbsp;31, 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commodity Hedge Agreement</U>&#148; shall mean any crude oil, natural gas, or other
hydrocarbon floor, collar, cap, price protection, or swap agreement, in form and substance with a
Person acceptable to the Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commonly Controlled Entity</U>&#148; shall mean any Person which is under common control with
the Borrower within the meaning of Section&nbsp;4001 of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Compliance Certificate</U>&#148; shall mean each certificate, substantially in the form
attached hereto as Exhibit&nbsp;III, executed by a Responsible Officer of the Borrower and furnished to
the Agent from time to time in accordance with Sections&nbsp;5.2 and 5.3.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Contingent Obligation</U>&#148; shall mean, as to any Person, without duplication, any
obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person (for purposes of this definition, a &#147;<U>primary obligation</U>&#148;) in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, regardless of whether such obligation is contingent, (a)&nbsp;to purchase
any primary obligation or any Property constituting direct or indirect security therefore, (b)&nbsp;to
advance or supply funds (i)&nbsp;for the purchase or payment of any primary obligation, or (ii)&nbsp;to
maintain working or equity capital of any other Person in respect of any primary obligation, or
otherwise to maintain the net worth or solvency of any other Person, (c)&nbsp;to purchase Property,
securities or services primarily for the purpose of assuring the owner of any primary obligation
of the ability of the Person primarily liable for such primary obligation to make payment thereof,
or (d)&nbsp;otherwise to assure or hold harmless the owner of any such primary obligation against loss
in respect thereof, with the amount of any Contingent Obligation being deemed to be equal to the
stated or determinable amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by such Person in good faith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Current Assets</U>&#148; shall mean all assets which would, in accordance with GAAP, be included as
current assets on a consolidated balance sheet of the Borrower as of the date of calculation, plus
the then current available Commitment but excluding mark to market valuation under Commodity Hedge
Agreements and Rate Management Transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Current Liabilities</U>&#148; shall mean all consolidated liabilities which would, in
accordance with GAAP, be included as current liabilities on a balance sheet of the Borrower as of
the date of calculation, but excluding the current maturities in
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">respect of the Obligations, and excluding mark to market valuation under Commodity Hedge
Agreements and Rate Management Transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default</U>&#148; shall mean any event or occurrence which with the lapse of time or the giving of
notice or both would become an Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default Rate</U>&#148; shall mean a per annum interest rate equal to the Base Rate plus five percent
(5%), but in no event exceeding the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dollars</U>&#148; and &#147;<U>$</U>&#148; shall mean dollars in lawful currency of the United States of America.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>EBITDAX</U>&#148; shall mean, for any period, Net Income for such period plus interest expense,
federal and state income taxes, depreciation, amortization, exploration, and other non-cash
expenses, less non-cash gains for such period deducted in the determination of Net Income for such
period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental Complaint</U>&#148; shall mean any written or oral complaint, order, directive,
claim, citation, notice of environmental report or investigation, or other notice by any
Governmental Authority or any other Person with respect to (a)&nbsp;air emissions, (b)&nbsp;spills,
releases, or discharges to soils, any improvements located thereon, surface water, groundwater, or
the sewer, septic, waste treatment, storage, or disposal systems servicing any Property of the
Borrower, (c)&nbsp;solid or liquid waste disposal, (d)&nbsp;the use, generation, storage, transportation, or
disposal of any Hazardous Substance, or (e)&nbsp;other environmental, health, or safety matters
affecting any Property of the Borrower or the business conducted thereon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental Laws</U>&#148; shall mean (a)&nbsp;the following federal laws as they may be cited,
referenced, and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe
Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Superfund Amendments and Reauthorization Act, and the Toxic Substances
Control Act; (b)&nbsp;any and all equivalent environmental statutes of any state in which Property of
the Borrower is situated, as they may be cited, referenced and amended from time to time; (c)&nbsp;any
rules or regulations promulgated under or adopted pursuant to the above federal and state laws;
and (d)&nbsp;any other equivalent federal, state, or local statute or any requirement, rule,
regulation, code, ordinance, or order adopted pursuant thereto, including, without limitation,
those relating to the generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>ERISA</U>&#148; shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations thereunder and interpretations thereof.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event of Default</U>&#148; shall mean any of the events specified in Section&nbsp;7.1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Facility Amount</U>&#148; shall mean, for each Lender, the amount set forth opposite the name
of such Lender on <U>Exhibit&nbsp;IV</U> under the caption &#147;Facility Amounts,&#148; as modified from time to
time to reflect assignments permitted by Section&nbsp;9.1 or otherwise pursuant to the terms hereof and
to give effect to any written request of the Borrower (any such request being irrevocable, absent
written agreement of the Agent and the Required Lenders, which written agreement may be expressly
conditioned on the payment of a fee (other than with respect to a reduction) by the Borrower to the
Agent, for the account of the Lenders) to a reduction in the sum of the then existing Facility
Amounts of the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Fee Letter Agreement</U>&#148; shall mean the agreement dated of even date herewith by and
among the Borrower and the Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Final Maturity</U>&#148; shall mean March&nbsp;31, 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Financial Statements</U>&#148; shall mean consolidated statements of the financial condition
of the Borrower as at the point in time and for the period indicated and consisting of at least a
balance sheet and related statements of operations, common stock and other stockholders&#146; equity,
and cash flows for the Borrower and, when required by applicable provisions of this Agreement to
be audited, accompanied by the unqualified certification of an independent certified public
accountant acceptable to the Agent and footnotes to any of the foregoing, all of which shall be
prepared in accordance with GAAP consistently applied and in comparative form with respect to the
corresponding period of the preceding fiscal period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Fixed Rate Loan</U>&#148; shall mean any LIBO Rate Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Floating Rate</U>&#148; shall mean an interest rate per annum equal to the Base Rate from time to
time in effect plus one-half of one percent (1/2 of 1%), on all Loans hereunder, but in no event
exceeding the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Floating Rate Loan</U>&#148; shall mean any Loan and any portion of the Loan Balance which
the Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent
Borrowing Request for such portion of the Loan Balance, bearing interest at the Floating Rate, or
which pursuant to the terms hereof is otherwise required to bear interest at the Floating Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; shall mean generally accepted accounting principles established by the Financial
Accounting Standards Board or the American Institute of Certified Public Accountants and in effect
in the United States from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental Authority</U>&#148; shall mean any nation, country, commonwealth, territory,
government, state, county, parish, municipality, or other
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">political subdivision and any entity exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Hazardous Substances</U>&#148; shall mean flammables, explosives, radioactive materials,
hazardous wastes, asbestos, or any material containing asbestos, polychlorinated biphenyls (PCBs),
toxic substances or related materials, petroleum, petroleum products, associated oil or natural
gas exploration, production, and development wastes, or any substances defined as &#147;hazardous
substances,&#148; &#147;hazardous materials,&#148; &#147;hazardous wastes,&#148; or &#147;toxic substances&#148; under the
Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund
Amendments and Reauthorization Act, as amended, the Hazardous Materials Transportation Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act,
as amended, or any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Highest Lawful Rate</U>&#148; shall mean the maximum non-usurious interest rate, if any (or,
if the context so requires, an amount calculated at such rate), that at any time or from time to
time may be contracted for, taken, reserved, charged, or received under applicable laws of the
State of Texas or the United States of America, whichever authorizes the greater rate, as such laws
are presently in effect or, to the extent allowed by applicable law, as such laws may hereafter be
in effect and which allow a higher maximum non-usurious interest rate than such laws now allow.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indebtedness</U>&#148; shall mean, as to any Person, without duplication, (a)&nbsp;all liabilities
(excluding reserves for deferred income taxes, deferred compensation liabilities, and other
deferred liabilities and credits) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet, (b)&nbsp;all obligations of such
Person evidenced by bonds, debentures, promissory notes, or similar evidences of indebtedness, (c)
all other indebtedness of such Person for borrowed money, and (d)&nbsp;all obligations of others, to the
extent any such obligation is secured by a Lien on the assets of such Person (whether or not such
Person has assumed or become liable for the obligation secured by such Lien).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Insolvency Proceeding</U>&#148; shall mean application (whether voluntary or instituted by
another Person) for or the consent to the appointment of a receiver, trustee, conservator,
custodian, or liquidator of any Person or of all or a substantial part of the Property of such
Person, or the filing of a petition (whether voluntary or instituted by another Person) commencing
a case under Title 11 of the United States Code, seeking liquidation, reorganization, or
rearrangement or taking advantage of any bankruptcy, insolvency, debtor&#146;s relief, or other similar
law of the United States, the State of Texas, or any other jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Intellectual Property</U>&#148; shall mean patents, patent applications, trademarks,
tradenames, copyrights, technology, know-how, and processes.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Expense</U>&#148; shall mean, for any period, the total interest expense (including, without
limitation, interest expense attributable to capitalized leases) of the Borrower for such period,
determined in accordance with GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Period</U>&#148; shall mean, subject to the limitations set forth in Section&nbsp;2.21, with
respect to any LIBO Rate Loan, a period commencing on the date such Loan is made or converted from
a Loan of another type pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically corresponding day in the calendar
month that is 30, 60 and 90&nbsp;days thereafter, as the Borrower may request in the Borrowing Request
for such Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Investment</U>&#148; in any Person shall mean any stock, bond, note, or other evidence of
Indebtedness, or any other security (other than current trade and customer accounts) of,
investment or partnership interest in or loan to, such Person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>L/C Exposure</U>&#148; shall mean, at any time, the aggregate maximum amount available to be drawn
under outstanding Letters of Credit at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>L/C Issuer</U>&#148; shall mean the Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit</U>&#148; shall mean any standby letter of credit issued by the Agent for
the account of the Borrower pursuant to Section&nbsp;2.2.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit Application</U>&#148; shall mean the standard letter of credit application
employed by the Agent from time to time in connection with letters of credit, provided that in the
event of a conflict between the terms of each Letter of Credit Application and this Agreement, this
Agreement shall control.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit Fee</U>&#148; shall mean each fee payable to the Agent for the benefit of
the Lenders by the Borrower pursuant to Section&nbsp;2.13 upon or in connection with the issuance of a
Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LIBO Rate</U>&#148; shall mean, with respect to any Interest Period for any LIBO Rate Loan, the
lesser of (a)&nbsp;the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal
to the average of the offered quotations appearing on Bloomberg Professional LIBOR Index Page (or
if such Bloomberg Professional LIBOR Index Page shall not be available, any successor or similar
service selected by the Agent) as of approximately 10:00&nbsp;a.m., Central Standard or Central
Daylight Savings Time, as the case may be, on the day two Business Days prior to the first day of
such Interest Period for Dollar deposits in an amount comparable to the principal amount of such
LIBO Rate Loan and having a term comparable to the Interest Period for such LIBO Rate Loan, or (b)
the Highest Lawful Rate. If neither such Bloomberg Professional LIBOR Index Page nor any successor
or similar service is available, the term &#147;LIBO Rate&#148; shall mean, with respect to any Interest
Period for any LIBO Rate Loan, the lesser of (a)&nbsp;the rate
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">per annum (rounded upwards if necessary, to the nearest 1/16 of 1%) quoted by the Agent at
approximately 11:00&nbsp;a.m., London time (or as soon thereafter as practicable) two Business Days
prior to the first day of the Interest Period for such LIBO Rate Loan for the offering by the
Agent to leading banks in the London interbank market of Dollar deposits in an amount comparable
to the principal amount of such LIBO Rate Loan and having a term comparable to the Interest Period
for such LIBO Rate Loan, or (b)&nbsp;the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LIBO Rate Loan</U>&#148; shall mean any Loan and any portion of the Loan Balance which the
Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent Borrowing
Request for such portion of the Loan Balance, bearing interest at the Adjusted LIBO Rate and which
is permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Lien</U>&#148; shall mean any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of such Property, whether such interest is based on common law,
statute, or contract, and including, but not limited to, the lien or security interest arising
from a mortgage, ship mortgage, encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment, or bailment for security purposes (other than true leases or
true consignments), liens of mechanics, materialmen, and artisans, maritime liens and
reservations, exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Property which secure
an obligation owed to, or a claim by, a Person other than the owner of such Property (for the
purpose of this Agreement, the Borrower shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the Property has been retained by or vested in some other
Person for security purposes), and the filing or recording of any financing statement or other
security instrument in any public office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Limitation Period</U>&#148; shall mean, with respect to any Lender, any period while any
amount remains owing on the Note payable to such Lender and interest on such amount, calculated at
the applicable interest rate, plus any fees or other sums payable to such Lender under any Loan
Document and deemed to be interest under applicable law, would exceed the amount of interest which
would accrue at the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan</U>&#148; shall mean any loan made by any Lender to or for the benefit of the Borrower pursuant
to this Agreement and any payment made by the Lender under a Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Balance</U>&#148; shall mean, at any time, the outstanding principal balance of the Notes at
such time plus the L/C Exposure at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Documents</U>&#148; shall mean this Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Security Instruments, and all other
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">documents and instruments now or hereafter delivered pursuant to the terms of or in connection
with this Agreement, the Note, the Letter of Credit Applications, the Letters of Credit, or the
Security Instruments, and all renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Effect</U>&#148; shall mean (a)&nbsp;any adverse effect on the business,
operations, properties, condition (financial or otherwise), or prospects of the Borrower, which
substantially increases the risk that any of the Obligations will not be repaid as and when due, or
(b)&nbsp;any substantially adverse effect upon the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Mortgaged Properties</U>&#148; shall mean all Oil and Gas Properties of the Borrower subject
to a perfected first-priority Lien in favor of the Agent for the benefit of the Lenders, subject
only to Permitted Liens, as security for the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Multiemployer Plan</U>&#148; shall mean a Plan which is a multiemployer plan as defined in
Section&nbsp;4001 (a)(3) of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Net Income</U>&#148; shall mean, for any period, the net income (or loss) of the Borrower for such
period, determined in accordance with GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Notes</U>&#148; shall mean, collectively, each of the promissory notes of the Borrower payable to a
Lender in the amount of the Facility Amount of such Lender in the form attached hereto as
<U>Exhibit&nbsp;I</U> and <U>Exhibit&nbsp;I(A)</U> with all blanks in such form completed appropriately,
together with all renewals, extensions for any period, increases, and rearrangements thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Obligations</U>&#148; shall mean, without duplication, (a)&nbsp;all Indebtedness evidenced by the Note, including the Revolving Line of Credit Number 2 Note, (b)&nbsp;the Reimbursement Obligations, (c)&nbsp;the
undrawn, unexpired amount of all outstanding Letters of Credit, (d)&nbsp;the obligation of the Borrower
for the payment of Commitment Fees, Letter of Credit Fees, and fees specified in the Fee Letter
Agreement, (e)&nbsp;all obligations and liabilities whether now existing or hereafter arising of the
Borrower to the Lenders or an affiliate of the Lenders in connection with any Commodity Hedge
Agreement or Rate Management Transaction, and (f)&nbsp;all other obligations and liabilities of the
Borrower to the Lenders, now existing or hereafter incurred, under, arising out of or in
connection with any Loan Document, and to the extent that any of the foregoing includes or refers
to the payment of amounts deemed or constituting interest, only so much thereof as shall have
accrued, been earned and which remains unpaid at each relevant time of determination.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Oil and Gas Properties</U>&#148; shall mean fee, leasehold, or other interests in or under mineral
estates or oil, gas, and other liquid or gaseous hydrocarbon leases with respect to Properties
situated in the United States or offshore from any State
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of the United States, including, without limitation, overriding royalty and royalty
interests, leasehold estate interests, net profits interests, production payment interests, and
mineral fee interests, together with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging, affixed, or incidental
thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Percentage Share</u>&#148; shall mean, as to each Lender, the percentage such Lender&#146;s
Facility Amount constitutes of the sum of the Facility Amounts of all Lenders as such percentage
is set forth on Exhibit&nbsp;IV opposite the name of such Lender on Exhibit&nbsp;IV.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>PBGC</U>&#148; shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA or any entity succeeding to any or all of its functions under ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted Liens</u>&#148; shall mean (a)&nbsp;Liens for taxes, assessments, or other governmental charges
or levies not yet due or which (if foreclosure, distraint, sale, or other similar proceedings shall
not have been initiated) are being contested in good faith by appropriate proceedings, and such
reserve as may be required by GAAP shall have been made therefor, (b)&nbsp;Liens in connection with
workers&#146; compensation, unemployment insurance or other social security (other than Liens created by
Section&nbsp;4068 of ERISA), old-age pension, or public liability obligations which are not yet due or
which are being contested in good faith by appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefore, (c)&nbsp;Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of obligations which are not yet due
or which are being contested in good faith by appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefore, (d)&nbsp;Liens in favor of operators and non-operators
under joint operating agreements or similar contractual arrangements arising in the ordinary course
of the business of the Borrower to secure amounts owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefore, (e)&nbsp;Liens under production sales agreements, division orders,
operating agreements, and other agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not constituting Indebtedness and provided
that such Liens do not secure obligations to deliver hydrocarbons at some future date without
receiving full payment therefore within 90&nbsp;days of delivery, (f)&nbsp;easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the chain of title which are
customarily accepted in the oil and gas financing industry, none of which interfere with the
ordinary conduct of the business of the Borrower or materially detract from the value or use of the
Property to which they apply, (h)&nbsp;Liens in favor of the Agent and other Liens expressly permitted
under the Security Instruments, and (i)&nbsp;the lien shown on Exhibit&nbsp;V as a Permitted Lien.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; shall mean an individual, corporation, partnership, trust, unincorporated
organization, limited liability company, government, any agency or political subdivision of any
government, or any other form of entity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Plan</U>&#148; shall mean, at any time, any employee benefit plan which is covered by ERISA and in
respect of which the Borrower or any Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section&nbsp;4069 of ERISA be deemed to be) an &#147;employer&#148; as
defined in Section&nbsp;3(5) of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Principal Office</U>&#148; shall mean the principal office of the Agent in Dallas, Texas, presently
located at 8333 Douglas Avenue, Dallas, Texas 75225.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Prohibited Transaction</u>&#148; shall have the meaning assigned to such term in Section&nbsp;4975
of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Property</U>&#148; shall mean any interest in any kind of property or asset, whether real, personal
or mixed, tangible or intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Rate Management Transaction</u>&#148; shall mean any transaction (including an agreement with
respect thereto) now existing or hereafter entered into between Borrower and Lenders which is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of these transactions) or any
combination thereof, whether linked to on or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Regulation&nbsp;D</U>&#148; shall mean Regulation&nbsp;D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Regulatory Change</u>&#148; shall mean the passage, adoption, institution, or amendment of
any federal, state, local, or foreign Requirement of Law (including, without limitation,
Regulation&nbsp;D), or any interpretation, directive, or request (whether or not having the force of
law) of any Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date and applying to a
class of banks including the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Reimbursement Obligation</u>&#148; shall mean the obligation of the Borrower to provide to
the Lenders or reimburse the Lenders for any amounts payable, paid, or incurred by the Lenders
with respect to Letters of Credit.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Related Parties</U>&#148; shall mean with respect to any specified Person, such Person&#146;s Affiliates
and the respective directors, officer, employees, agents and advisors (including attorneys,
accountants and experts) of such Person and such Person&#146;s Affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Release of Hazardous Substances</u>&#148; shall mean any emission, spill, release, disposal,
or discharge, except in accordance with a valid permit, license, certificate, or approval of the
relevant Governmental Authority, of any Hazardous Substance into or upon (a)&nbsp;the air, (b)&nbsp;soils or
any improvements located thereon, (c)&nbsp;surface water or groundwater, or (d)&nbsp;the sewer or septic
system, or the waste treatment, storage, or disposal system servicing any Property of the
Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reorganization</U>&#148; shall mean, with respect to any Multiemployer Plan, that such Plan is in
reorganization within the meaning of such term in Section&nbsp;4241 of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Reportable Event</u>&#148; shall mean any of the events set forth in Section&nbsp;4043 (b)&nbsp;of
ERISA, other than those events as to which the thirty-day notice period is waived under
subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. &#167;2615.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Lenders</U>&#148; shall mean, Lenders including holding more than 75% which must
include the Agent as a Lender of the then Loan Balance, or, if there is no Loan Balance, Lenders
having more than 75%, which must include the Agent as a Lender, of the aggregate amount of the
Commitments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Requirement of Law</U>&#148; shall mean, as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such Person, and any
applicable law, treaty, ordinance, order, judgment, rule, decree, regulation, or determination of
an arbitrator, court, or other Governmental Authority, including, without limitation, rules,
regulations, orders, and requirements for permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may be hereafter amended and are applicable to
or binding upon such Person or any of its Property or to which such Person or any of its Property
is subject.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reserve Report</U>&#148; shall mean each report delivered to the Agent and each Lender pursuant to
Section&nbsp;5.4.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Responsible Officer</U>&#148; shall mean, as to any Person, its President, Chief Executive
Officer or any Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Revolving Line of Credit Number 2 Loan</U>&#148; shall mean the Revolving Line of Credit
Number 2 Loan described in Section&nbsp;2.1B.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Revolving Line of Credit Number 2 Loan Available Commitment</U>&#148; shall mean on the
Closing Date the sum of $10,000,000. Such amount may be reduced by semi-annual reviews of
Collateral as described in Section&nbsp;2.1B.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Revolving Line of Credit Number 2 Notes</U>&#148; shall mean, collectively, each of the
promissory notes of the Borrower payable to a Lender in the amount of the Revolving Line of Credit
Number 2 Facility Amount of such Lender in the form attached hereto as Exhibit&nbsp;I(A) with all
blanks in such form completed appropriately, together with all renewals, extensions for any
period, increases and rearrangements thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Security Instruments</U>&#148; shall mean the security instruments executed and delivered in
satisfaction of the condition set forth in Section&nbsp;3.1(d), of the Existing Agreement and all other
documents and instruments at any time executed as security for all or any portion of the
Obligations, as such instruments may be amended, restated, or supplemented from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Single Employer Plan</U>&#148; shall mean any Plan which is covered by Title IV of ERISA, but
which is not a Multiemployer Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; shall mean, as to any Person, a corporation of which shares of stock having
ordinary voting power (other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of such corporation
are at the time owned, or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Superfund Site</U>&#148; shall mean those sites listed on the Environmental Protection Agency
National Priority List and eligible for remedial action or any comparable state registries or list
in any state of the United States.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Swap Termination Value</U>&#148; shall mean in respect of any one or more Commodity Hedge
Agreements or Rate Management Transactions (any such agreement or transaction, a &#147;Swap
Agreement&#148;), after taking into account the effect of any legally enforceable netting agreement
relating to such Swap Agreements, (a)&nbsp;for any date on or after the date such Swap Agreements have
been closed out and termination value(s) determined in accordance therewith, such termination
value(s) and (b)&nbsp;for any date prior to the date referenced in clause (a), the amount(s) determined
as the mark-to-market value(s) for such Swap Agreements, as determined by the counterparties to
such Swap Agreements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Tangible Net Worth</U>&#148; shall mean (a)&nbsp;total assets, as would be reflected on a balance
sheet of the Borrower prepared in accordance with GAAP, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses, permits, and other intangible assets,
treasury stock, unamortized underwriters&#146; debt discount and expenses, and goodwill minus (b)&nbsp;total
liabilities, as would be reflected on a balance sheet of the Borrower prepared in accordance with
GAAP
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">but (c)&nbsp;excluding other comprehensive income related to Commodity Hedge Agreements
and Rate Management Transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transferee</U>&#148; shall mean any Person to which any Lender has sold, assigned,
transferred, or granted a participation in any of the Obligations, as authorized
pursuant to Section&nbsp;9.1, and any Person acquiring, by purchase, assignment,
transfer, or participation, from any such purchaser, assignee, transferee, or
participant, any part of such Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>UCC</U>&#148; shall mean the Uniform Commercial Code as from time to time in effect in
the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Undefined Financial Accounting Terms.</U> Undefined financial accounting terms used
in this Agreement shall be defined according to GAAP at the time in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>References.</U> References in this Agreement to Exhibit, Article, or Section numbers
shall be to Exhibits, Articles, or Sections of this Agreement, unless expressly stated to the
contrary. References in this Agreement to &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinafter,&#148; &#147;hereinabove,&#148;
&#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which such reference
appears.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Articles and Sections.</U> This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Number and Gender.</U> Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall be
construed as cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Incorporation of Exhibits.</U> The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all purposes.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE II</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U> <B>TERMS OF FACILITIES</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1
A. <U>Revolving Line of Credit.</U> (a)&nbsp;Upon the terms and conditions (including,
without limitation, the right of the Lenders to decline to make any Loan so long as any Default or
Event of Default exists) and relying on the representations and warranties contained in this
Agreement, each Lender severally agrees, during the Commitment Period, to make Loans, in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">immediately available funds at the Applicable Lending Office or the Principal Office, to or for
the benefit of the Borrower in an aggregate principal amount not to exceed at any time outstanding
the lessor of the Facility Amount of such Lender or the Percentage Share of such Lender of the
Borrowing Base then in effect. Loans shall be made from time to time on any Business Day
designated by the Borrower following receipt by the Agent of a Borrowing Request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Subject to the terms of this Agreement, during the Commitment Period, the Borrower may
borrow, repay, and reborrow and convert Loans of one type or with one Interest Period into Loans of
another type or with a different Interest Period. Except for prepayments made pursuant to
Section&nbsp;2.10, each borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $100,000. Each borrowing, prepayment, or conversion of or into a Loan
of a different type or, in the case of a LIBO Rate Loan, having a different Interest Period, shall
be deemed a separate borrowing, conversion, and prepayment for purposes of the foregoing, one for
each type of Loan or Interest Period. Anything in this Agreement to the contrary notwithstanding,
the aggregate principal amount of LIBO Rate Loans having the same Interest Period shall be at least
equal to $100,000; and if any LIBO Rate Loan would otherwise be in a lesser principal amount for
any period, such Loan shall be a Floating Rate Loan during such period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Loans shall be made and maintained at the Applicable Lending Office or the Principal
Office and shall be evidenced by the Notes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Not later than 2:00 p.m., Central Standard or Central Daylight Savings Time, as the case
may be, on the date specified for each borrowing, each Lender shall make available an amount equal
to its Percentage Share of the borrowing to be made on such date to the Agent, at an account
designated by the Agent, in immediately available funds, for the account of the Borrower. The
amount so received by the Agent shall, subject to the terms and conditions hereof, be made
available to the Borrower in immediately available funds at the Principal Office by the end of that
Business Day. All Loans by each Lender shall be maintained at the Applicable Lending Office of such
Lender and shall be evidenced by the Note of such Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The failure of any Lender to make any Loan required to be made by it hereunder shall not
relieve any other Lender of its obligation to make any Loan required to be made by it, and no
Lender shall be responsible for the failure of any other Lender to make any Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The face amounts of the Notes have been established as an administrative convenience and
do not commit any Lender to advance funds hereunder in excess of the then current Borrowing Base.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;<U>Revolving Line of Credit Number 2 Loan.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Revolving Line of Credit Number 2 Loan shall be in the total amount of $10,000,000,
with interest payable as set forth in Sections&nbsp;2.4 and 2.5, with payment on Floating Rate Loans
beginning January&nbsp;1, 2007, and on LIBO Rate Loans as described in Section&nbsp;2.5.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The terms of Section&nbsp;2.1 A (a), (b), (c), (d), (e)&nbsp;and (f)&nbsp;are applicable to the Revolving
Line of Credit Number 2 Loan and incorporated herein by this reference.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Agent, on behalf of the Lenders, shall conduct semi-annual reviews of the value of the
Collateral including, but not limited to, net operating fees and service rigs and miscellaneous
equipment to determine the Revolving Line of Credit Number 2 Loan Available Commitment. The
determination of the Agent of this amount, in Agent&#146;s sole discretion, shall be sent to the Lender
at the same time as the Borrowing Base determinations are sent to the Borrower. If the Loans
under Line of Credit Number 2 exceed the Revolving Line of Credit Number 2 Available Commitment,
the Borrower will, within five (5)&nbsp;days of such written notice, pay the sum required to reduce the
Loans under Line of Credit Number 2 to the Revolving Line of Credit Number 2 Available Commitment
to the Agent for the benefit of the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Letter of Credit Facility.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Issuance.</U> The LC Issuer hereby agrees, on the terms and conditions set forth in
this Agreement, to issue standby letters of credit (each, a &#147;<U>Letter of Credit</U>&#148;) and to renew,
extend, increase, decrease or otherwise modify each Letter of Credit (&#147;<U>Modify,</U>&#148; and each such
action a &#147;<U>Modification</U>&#148;), from time to time from and including the date of this Agreement and prior
to the Commitment Termination Date upon the request of the Borrower; <I>provided </I>that immediately
after each such Letter of Credit is issued or Modified, (i)&nbsp;the aggregate amount of the outstanding
L/C Exposure shall not exceed Ten Million Dollars ($10,000,000) and (ii)&nbsp;the L/C Exposure, when
added to the Loan Balance then outstanding, shall not exceed the Commitment Amount. Letters of
Credit outstanding under the Existing Agreement as of the date of this Agreement shall also
constitute Letters of Credit hereunder and each Lender hereunder shall be deemed to have purchased
the related L/C Exposure in proportion to its Percentage Share. No Letter of Credit shall have an
expiry date later than the earlier of (x)&nbsp;the thirtieth (30th) day prior to the Commitment
Termination Date and (y)&nbsp;twelve (12)&nbsp;months after its issuance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Participations.</U> Upon the issuance or Modification by the LC Issuer of a Letter of
Credit in accordance with this <U>Section&nbsp;2.2,</U> the LC Issuer shall be deemed, without further
action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each
Lender shall be deemed, without further action by any party hereto, to have unconditionally and
irrevocably purchased from the LC Issuer, a participation in such Letter of Credit (and each
Modification thereof) and the related L/C Exposure in proportion to its Percentage Share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Notice.</U> Subject to <U>Section&nbsp;2.2(a).</U> the Borrower shall give the LC Issuer
notice prior to 10:00&nbsp;a.m. (Dallas, Texas time) at least five Business Days prior to the proposed
date of issuance or Modification of each Letter of Credit, specifying the beneficiary, the proposed
date of issuance (or Modification) and the expiry date of such Letter of Credit, and describing the
proposed terms of such Letter of Credit and the nature of the transactions proposed to be supported
thereby. Upon receipt of such notice, the LC Issuer shall promptly notify each Lender, of the
contents thereof and of the amount of such Lender&#146;s participation in such proposed Letter of
Credit. The issuance or Modification by the LC Issuer of any Letter of Credit shall, in addition
to the conditions precedent set forth in <U>Article&nbsp;III</U> (the satisfaction of
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that
such Letter of Credit shall be satisfactory to the LC Issuer and that the Borrower shall have
executed and delivered such application agreement and/or such other instruments and agreements
relating to such Letter of Credit as the LC Issuer shall have reasonably requested (each, a &#147;<U>Letter
of Credit Application</U>&#148;). In the event of any conflict between the terms of this Agreement and the
terms of any Letter of Credit Application, the terms of this Agreement shall control. Each notice
required or permitted to be given under this <U>Section&nbsp;2.2(c)</U> by any party to any other party
may be given by fax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Administration; Reimbursement by Lenders.</U> Upon receipt from the beneficiary of
any Letter of Credit of any demand for payment under such Letter of Credit, the LC Issuer shall
promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as
a result of such demand and the proposed payment date (the <U>&#147;LC Payment Date</U>&#148;). The
responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the
documents (including each demand for payment) delivered under each Letter of Credit in connection
with such presentment shall be in conformity in all material respects with such Letter of Credit.
The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the
Letter of Credits as it does with respect to letters of credit in which no participations are
granted, <U>IT BEING UNDERSTOOD THAT IN THE ABSENCE OF ANY GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT BY THE LC ISSUER, EACH LENDER SHALL BE UNCONDITIONALLY AND IRREVOCABLY LIABLE
WITHOUT REGARD TO THE OCCURRENCE OF ANY DEFAULT OR ANY CONDITION PRECEDENT
WHATSOEVER, TO REIMBURSE THE LC ISSUER ON DEMAND FOR</u> (i) such Lender&#146;s Percentage Share of the
amount of each payment made by the LC Issuer under each Letter of Credit to the extent such amount
is not reimbursed by the Borrower pursuant to <U>Section&nbsp;2.2(e)</U> below, plus (ii)&nbsp;interest on
the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer&#146;s
demand for such reimbursement (or, if such demand is made after 10:00&nbsp;a.m. (Dallas, Texas time) on
such date, from the next succeeding Business Day) to the date on which such Lender pays the amount
to be reimbursed by it, at a rate of interest per annum equal to the Assessment Rate for the first
three days and, thereafter, at a rate of interest equal to the Floating Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
<U>Reimbursement by Borrower.</u> &nbsp;<u>THE BORROWER SHALL BE IRREVOCABLY AND
UNCONDITIONALLY OBLIGATED TO REIMBURSE THE LC ISSUER ON OR BEFORE THE APPLICABLE LC PAYMENT DATE
FOR ANY AMOUNTS TO BE PAID BY THE LC ISSUER UPON ANY DRAWING UNDER ANY LETTER OF CREDIT, WITHOUT
PRESENTMENT, DEMAND, PROTEST OR OTHER FORMALITIES OF ANY KIND; <I>PROVIDED </I>THAT NEITHER THE BORROWER
NOR ANY LENDER SHALL HEREBY BE PRECLUDED FROM ASSERTING ANY CLAIM FOR DIRECT (BUT NOT
CONSEQUENTIAL) DAMAGES SUFFERED BY THE BORROWER OR SUCH LENDER TO THE
EXTENT, BUT ONLY TO THE
EXTENT, CAUSED BY (I)&nbsp;THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE LC ISSUER
IN DETERMINING WHETHER A REQUEST PRESENTED UNDER ANY LETTER OF CREDIT ISSUED BY IT COMPLIED
WITH THE TERMS OF SUCH LETTER OF CREDIT OR (II)&nbsp;THE LC ISSUER&#146;S FAILURE TO PAY UNDER ANY LETTER OF
CREDIT ISSUED BY IT AFTER THE PRESENTATION TO IT OF A REQUEST STRICTLY COMPLYING WITH THE TERMS AND
CONDITIONS OF SUCH LETTER OF CREDIT.</U> All such amounts
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to (x)&nbsp;the rate applicable to Floating Rate Loans
for such day if such day falls on or before the applicable LC Payment Date and (y)&nbsp;the sum of two
percent (2%) plus the rate applicable to Floating Rate Loans for such day if such day falls after
such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its
Percentage Share all amounts received by it from the Borrower for application in payment, in whole
or in part, of the Reimbursement Obligation in respect of any Letter of Credit issued by the LC
Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such
Letter of Credit pursuant to Section&nbsp;2.2(d). Subject to the terms and conditions of this Agreement
(including without limitation the submission of a Request for Advance in compliance with Section
2.1 and the satisfaction of the applicable conditions precedent set forth in Article&nbsp;III), the
Borrower may request a Loan hereunder for the purpose of satisfying any Reimbursement Obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Obligations Absolute.</U> The Borrower&#146;s obligations under this <U>Section&nbsp;2.2
</U>shall be absolute and unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC
Issuer, any Lender or any beneficiary of a Letter of Credit. The Borrower further agrees with the
LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the
Borrower&#146;s Reimbursement Obligation in respect of any Letter of Credit shall not be affected by,
among other things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the
beneficiary of any Letter of Credit or any financing institution or other party to whom any Letter
of Credit may be transferred or any claims or defenses whatsoever of the Borrower or of any of its
Affiliates against the beneficiary of any Letter of Credit or any such transferee. The LC Issuer
shall not be liable for any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any Letter of Credit.
The Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in
connection with each Letter of Credit and the related drafts and documents, if done without gross
negligence or willful misconduct, shall be binding upon the Borrower and shall not put the LC
Issuer or any Lender under any liability to the Borrower. Nothing in this <U>Section&nbsp;2.2(f)</U> is
intended to limit the right of the Borrower to make a claim against the LC Issuer for damages as
contemplated by the proviso to the first sentence of <U>Section 2.2(e).</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <U>Actions of LC Issuer.</U> The LC Issuer shall be entitled to rely, and shall be fully
protected in relying, upon any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall
be fully justified in failing or refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Required Lenders as it reasonably deems
appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by reason of taking or continuing to
take any such action. Notwithstanding any other provision of this <U>Section&nbsp;2.2,</U> the LC
Issuer shall
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in all cases be fully protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Lenders, and such request and any action taken or failure
to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation
in any Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <U>Indemnification.</U> THE BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS EACH
LENDER PARTY AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY
AND ALL CLAIMS AND DAMAGES, LOSSES, LIABILITIES, COSTS OR EXPENSES WHICH SUCH LENDER PARTY MAY
INCUR (OR WHICH MAY BE CLAIMED AGAINST SUCH LENDER PARTY BY ANY PERSON WHATSOEVER) BY REASON OF OR
IN CONNECTION WITH THE ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO
PAY UNDER ANY LETTER OF CREDIT OR ANY ACTUAL OR PROPOSED USE OF ANY LETTER OF CREDIT, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS OR EXPENSES WHICH THE LC
ISSUER MAY INCUR BY REASON OF OR IN CONNECTION WITH (I)&nbsp;THE FAILURE OF ANY OTHER LENDER TO FULFILL
OR COMPLY WITH ITS OBLIGATIONS TO THE LC ISSUER HEREUNDER (BUT NOTHING HEREIN CONTAINED SHALL
AFFECT ANY RIGHTS THE BORROWER MAY HAVE AGAINST ANY DEFAULTING LENDER) OR (II)&nbsp;BY REASON OF OR ON
ACCOUNT OF THE LC ISSUER ISSUING ANY LETTER OF CREDIT WHICH SPECIFIES THAT THE TERM &#147;BENEFICIARY&#148;
INCLUDED THEREIN INCLUDES ANY SUCCESSOR BY OPERATION OF LAW OF THE NAMED BENEFICIARY, BUT WHICH
LETTER OF CREDIT DOES NOT REQUIRE THAT ANY DRAWING BY ANY SUCH SUCCESSOR BENEFICIARY BE
ACCOMPANIED BY A COPY OF A LEGAL DOCUMENT, SATISFACTORY TO THE LC ISSUER, EVIDENCING THE
APPOINTMENT OF SUCH SUCCESSOR BENEFICIARY; <I>PROVIDED </I>THAT THE BORROWER SHALL NOT BE REQUIRED TO
INDEMNIFY ANY LENDER PARTY FOR ANY CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS OR EXPENSES TO THE
EXTENT, BUT ONLY TO THE EXTENT, CAUSED BY (X)&nbsp;THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF THE LC
ISSUER IN DETERMINING WHETHER A REQUEST PRESENTED UNDER ANY LETTER OF CREDIT COMPLIED WITH THE
TERMS OF SUCH LETTER OF CREDIT OR (Y)&nbsp;THE LC ISSUER&#146;S FAILURE TO PAY UNDER ANY LETTER OF CREDIT
AFTER THE PRESENTATION TO IT OF A REQUEST STRICTLY COMPLYING WITH THE TERMS AND CONDITIONS OF SUCH
LETTER OF CREDIT. NOTHING IN THIS <U>SECTION 2.2(h)</U> IS INTENDED TO LIMIT THE OBLIGATIONS OF
THE BORROWER UNDER ANY OTHER PROVISION OF THIS AGREEMENT.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Lenders&#146; Indemnification.</U> EACH LENDER SHALL, RATABLY IN ACCORDANCE WITH ITS
PERCENTAGE SHARE, INDEMNIFY THE LC ISSUER, ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES (TO THE EXTENT NOT REIMBURSED BY THE BORROWER) AGAINST ANY COST,
EXPENSE (INCLUDING REASONABLE COUNSEL FEES AND DISBURSEMENTS), CLAIM, DEMAND, ACTION, LOSS OR
LIABILITY (EXCEPT SUCH AS RESULT FROM SUCH INDEMNITEES&#146; GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR
THE LC ISSUER&#146;S FAILURE TO PAY UNDER ANY LETTER OF CREDIT AFTER THE PRESENTATION TO IT OF A
REQUEST STRICTLY COMPLYING
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">WITH THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT) THAT SUCH INDEMNITEES MAY SUFFER OR INCUR
IN CONNECTION WITH THIS <U>SECTION 2.2</u> OR ANY ACTION TAKEN OR OMITTED BY SUCH INDEMNITEES
HEREUNDER.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <U>Rights as a Lender.</U> In its capacity as a Lender, the LC Issuer shall have
the same rights and obligations as any other Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Use of Loan Proceeds and Letters of Credit.</U> (a)&nbsp;Proceeds of Loans shall be used
by the Borrower solely for acquisitions and development of Oil and Gas Properties working capital
and for general corporate purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Letters of Credit shall be used solely for other general corporate purposes and to
support Commodity Hedge Agreements and Rate Management Transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Interest.</U> Subject to the terms of this Agreement (including, without limitation,
Section&nbsp;2.16), interest on the Loans shall accrue and be payable at a rate per annum equal to the
Floating Rate for each Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan.
Interest on all Floating Rate Loans shall be computed on the basis of a year of 365 or 366&nbsp;days, as
applicable, for the actual days elapsed (including the first day but excluding the last day) during
the period for which payable. Interest on all LIBO Rate Loans shall be computed on the basis of a
year of 360&nbsp;days for the actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Notwithstanding the foregoing, interest on past-due
principal and, to the extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366&nbsp;days, as the case may be, for the
actual days elapsed (including the first day but excluding the last day) during the period for
which payable, and shall be payable upon demand by the Agent at any time as to all or any portion
of such interest. In the event that the Borrower fails to select the duration of any Interest
Period for any LIBO Rate Loan within the time period and otherwise as provided herein, such Loan
(if outstanding as a LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on
the last day of the then current Interest Period for such Loan or (if outstanding as a Floating
Rate Loan) will remain as, or (if not then outstanding) will be made as, a Floating Rate Loan.
Interest provided for herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date or dates of such
advances until repayment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Repayment of Loans and Interest.</U> Accrued and unpaid interest on each
outstanding Floating Rate Loan shall be due and payable monthly commencing on the first day of
January&nbsp;1, 2007, and continuing on the first day of each calendar month thereafter while any
Floating Rate Loan remains outstanding, the payment in each instance to be the amount of interest
which has accrued and remains unpaid in respect of the relevant Loan. Accrued and unpaid interest
on each outstanding LIBO Rate Loan shall be due and payable on the last day of the Interest Period
for such LIBO Rate Loan and, in the case of any Interest Period in excess of three months, on the
day of the third calendar month following the commencement of such Interest Period corresponding to
the day of the calendar month on which such Interest Period commenced, the payment in each instance
to be the amount of interest which has accrued and remains unpaid in respect of the relevant Loan.
The Loan Balance, together with all accrued and unpaid interest thereon, shall be due and payable
at Final Maturity. At the time of making each
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">payment hereunder or under the Note, the Borrower shall specify to the Agent the Loans or other
amounts payable by the Borrower hereunder to which such payment is to be applied. In the event the
Borrower fails to so specify, or if an Event of Default has occurred and is continuing, the Agent
may apply such payment as it may elect in its sole discretion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Outstanding Amounts.</U> The outstanding principal balance of the Notes reflected by
the notations by the Lenders on their records shall be deemed rebuttably presumptive evidence of
the principal amount owing on the Notes. The liability for payment of principal and interest
evidenced by the Notes shall be limited to principal amounts actually advanced and outstanding
pursuant to this Agreement and interest on such amounts calculated in accordance with this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Time, Place, and Method of Payments.</U> All payments required pursuant to this
Agreement or the Notes shall be made in lawful money of the United States of America and in
immediately available funds, shall be deemed received by the Agent on the Business Day received, or
on the next Business Day following receipt if such receipt is after 2:00 p.m., Central Standard or
Central Daylight Savings Time, as the case may be, on any Business Day, and shall be made at the
Principal Office. Except as provided to the contrary herein, if the due date of any payment
hereunder or under the Notes would otherwise fall on a day which is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8 <U>Pro Rata Treatment; Adjustments.</U> (a)&nbsp;Except to the extent otherwise expressly
provided herein, (i)&nbsp;each borrowing pursuant to this Agreement shall be made from the Lenders pro
rata in accordance with their respective Percentage Shares, (ii)&nbsp;each reduction of the sum of the
Facility Amounts of the Lenders at the request of the Borrower, as well as any subsequent increase
in the sum of the Facility Amounts of the Lenders at the request of the Borrower and with written
agreement of the Agent and the Required Lenders shall serve to adjust the Facility Amounts of the
Lenders pro rata in accordance with the Facility Amounts of the Lenders in effect immediately prior
to any such adjustment, (iii)&nbsp;each payment by the Borrower of fees shall be made for the account of
the Lenders pro rata in accordance with their respective Percentage Shares, (iv)&nbsp;each payment of
principal of Loans shall be made for the account of the Lenders pro rata in accordance with their
respective shares of the Loan Balance, and (v)&nbsp;each payment of interest on Loans shall be made for
the account of the Lenders pro rata in accordance with their respective shares of the aggregate
amount of interest due and payable to the Lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Agent shall distribute all payments with respect to the Obligations to the Lenders
promptly upon receipt in like funds as received. In the event that any payments made hereunder by
the Borrower at any particular time are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (i)&nbsp;first, to fees and expenses due pursuant
to the terms of this Agreement or any other Loan Document, (ii)&nbsp;second, to accrued interest, (iii)
third, to the Loan Balance, and (iv)&nbsp;last, to any other Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If any Lender (for purposes of this Section, a &#147;<U>Benefitted Lender</U>&#148;) shall at any time
receive any payment of all or part of its portion of the Obligations, or receive any Collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section&nbsp;7.1(f) or Section&nbsp;7.1(g), or otherwise) in an
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">amount greater than such Lender was entitled to receive pursuant to the terms hereof, such
Benefitted Lender shall purchase for cash from the other Lenders such portion of the Obligations
of such other Lenders, or shall provide such other Lenders with the&#146;benefits of any such
Collateral or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share
the excess payment or benefits of such Collateral or proceeds with each of the Lenders according
to the terms hereof. If all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded and the purchase price and
benefits returned by such Lender, to the extent of such recovery, but without interest. The
Borrower agrees that each such Lender so purchasing a portion of the Obligations of another Lender
may exercise all rights of payment (including rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion. If any Lender ever receives, by
voluntary payment, exercise of rights of set-off or banker&#146;s lien, counterclaim, cross-action or
otherwise, any funds of the Borrower to be applied to the Obligations, or receives any proceeds by
realization on or with respect to any Collateral, all such funds and proceeds shall be forwarded
immediately to the Agent for distribution in accordance with the terms of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9
<U>Borrowing Base Determinations.</U> (a)&nbsp;The Borrowing Base as of the Closing Date,
is acknowledged by the Borrower and the Lenders to be $72,000,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Borrowing Base shall be redetermined semi-annually on the basis of information
supplied by the Borrower in compliance with the provisions of this Agreement, including, without
limitation, Reserve Reports, and all other relevant information available to the Lenders. In
addition, the Lenders shall, in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base; provided, however, the Lenders shall not be obligated to respond to
more than two such requests during any calendar year, and in no event shall the Lenders be required
to redetermine the Borrowing Base more than once in any two- month period, including, without
limitation, each scheduled semi-annual redetermination provided for above. Notwithstanding the
foregoing, the Required Lenders may at their discretion redetermine the Borrowing Base and the
amount by which the Borrowing Base shall be reduced each calendar month at any time and from time
to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Upon each determination of the Borrowing Base by the Lenders, the Agent shall notify the
Borrower orally (confirming such notice promptly in writing) of such determination, and the
Borrowing Base and the monthly amount by which the Borrowing Base shall be reduced so communicated
to the Borrower shall become effective upon such written notification and shall remain in effect
until the next subsequent determination of the Borrowing Base and the monthly amount by which the
Borrowing Base shall be reduced.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Borrowing Base shall represent the determination by the Lenders, in accordance with
the applicable definitions and provisions herein contained and their customary lending practices
for loans of this nature, of the value, for loan purposes, of the Mortgaged Properties, subject, in
the case of any increase in the Borrowing Base, to the credit approval process of the Lenders.
Furthermore, the Borrower acknowledges that the determination of the Borrowing Base contains an
equity cushion (market value in excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lenders.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The Borrowing Base may be decreased by the Borrower by giving the Agent written notice of
the amount of the decrease and the resulting Borrowing Base. The Borrower may then only borrow up
to the amount of the decreased Borrowing Base and if any future increase in the Borrowing Base is
required the Borrower shall furnish the Agent with the information requested by the Agreement as
set forth in (b)&nbsp;above and pay all fees required by increasing the Borrowing Base.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10 <U>Mandatory Prepayments.</U> If at any time the sum of the Loan Balance exceeds the sum
of the Borrowing Base then in effect and the Revolving Line of Credit Number 2 Available
Commitment, the Borrower shall, within 60&nbsp;days of notice from the Agent of such occurrence, (a)
prepay, or make arrangements acceptable to the Lenders for the prepayment of, the amount of such
excess for application on the Loan Balance, (b)&nbsp;provide additional collateral, of character and
value satisfactory to the Lenders in their reasonable discretion, to secure the Obligations by the
execution and delivery to the Lenders of security instruments in form and substance satisfactory to
the Lenders in the exercise of their reasonable discretion, or (c)&nbsp;effect any combination of the
alternatives described in clauses (a)&nbsp;and (b)&nbsp;of this Section and acceptable to the Lenders in
their reasonable discretion. In the event that a mandatory prepayment is required under this
Section and the Loan Balance is less than the amount required to be prepaid, the Borrower shall
repay the entire Loan Balance and, in accordance with the provisions of the relevant Letter of
Credit Applications executed by the Borrower or otherwise to the reasonable satisfaction of the
Lenders, deposit with the Lenders, as additional collateral securing the Obligations, an amount of
cash, in immediately available funds, equal to the L/C Exposure minus the Borrowing Base. The
cash deposited with the Lenders in satisfaction of the requirement provided in this Section may be
invested, at the reasonable discretion of the Lenders and then only at the express direction of the
Borrower as to investment vehicle and maturity (which shall be no later than the latest expiry date
of any then outstanding Letter of Credit), for the account of the Borrower in cash or cash
equivalent investments offered by or through the Lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11 <U>Voluntary Prepayments and Conversions of Loans.</U> Subject to applicable
provisions of this Agreement, the Borrower shall have the right at any time or from time to time to
prepay Loans and to convert Loans of one type or with one Interest Period into Loans of another
type or with a different Interest Period; provided, however, that (a)&nbsp;the Borrower shall give the
Agent notice of each such prepayment or conversion of all or any portion of a LIBO Rate Loan no
less than two Business Days prior to prepayment or conversion, (b)&nbsp;any LIBO Rate Loan may be
prepaid or converted only on the last day of an Interest Period for such Loan, (c)&nbsp;the Borrower
shall pay all accrued and unpaid interest on the amounts prepaid or converted, and (d)&nbsp;no such
prepayment or conversion shall serve to postpone the repayment when due of any Obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12 <U>Commitment Fee.</U> In addition to interest on the Note as provided herein and all
other fees payable hereunder and to compensate the Lenders for maintaining funds available, the
Borrower shall pay to the Agent for the account of the Lenders, in immediately available funds, on
the first day of January, 2007, and on the first day of each third calendar month thereafter during
the Commitment Period, a fee in the amount of 0.375% per annum, calculated on the basis of a year
of 365 or 366&nbsp;days, as the case may be, for the actual days elapsed (including the first day but
excluding the last day), on the average daily amount of the Available Commitment
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and the Revolving Line of Credit Number 2 Loan Available Commitment during the preceding quarterly
period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13 <U>Letter of Credit Fee.</U> In addition to interest on the Note as provided herein and
all other fees payable hereunder, the Borrower agrees to pay to the Agent for the benefit of
Lenders, on the date of issuance of each Letter of Credit, a fee equal to the greater of $500 or
the Applicable Margin, calculated on the basis of a year of 365 or 366&nbsp;days, as the case may be,
for the actual days elapsed (including the first day but excluding the last day), on the face
amount of such Letter of Credit during the period for which such Letter of Credit is issued;
provided, however, in the event such Letter of Credit is canceled prior to its original expiry date
or a payment is made by the Agent for the benefit of Lenders with respect to such Letter of Credit,
the Agent shall, within 30&nbsp;days after such cancellation or the making of such payment, rebate to
the Borrower the unearned portion of such fee. The Borrower also agrees to pay to the Agent for the
benefit of Lenders on demand its customary letter of credit transactional fees, including, without
limitation, amendment fees, payable with respect to each Letter of Credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14 <U>Loans to Satisfy Obligations of Borrower.</U> The Lenders may, but shall not be
obligated to, but only if an Event of Default exists, make Loans for the benefit of the Borrower
and apply proceeds thereof to the satisfaction of any condition, warranty, representation, or
covenant of the Borrower contained in this Agreement or any other Loan Document. Any such Loan
shall be evidenced by the Note and shall be made as a Floating Rate Loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15 <U>Security Interest in Accounts; Right of Offset.</U> As security for the payment and
performance of the Obligations, the Borrower hereby transfers, assigns, and pledges to the Agent
for the benefit of the Lenders and to the Lenders individually and grants to the Agent for the
benefit of the Lenders and to the Lenders individually a security interest in all funds of the
Borrower now or hereafter or from time to time on deposit with the Agent and such Lender, with such
interest of the Lender to be retransferred, reassigned, and/or released by the Agent and each
Lender, as the case may be, at the expense of the Borrower upon payment in full and complete
performance by the Borrower of all Obligations. All remedies as secured party or assignee of such
funds shall be exercisable by the Lender during the existence of the occurrence of any Event of
Default, regardless of whether the exercise of any such remedy would result in any penalty or loss
of interest or profit with respect to any withdrawal of funds deposited in a time deposit account
prior to the maturity thereof. Furthermore, the Borrower hereby grants to the Agent and each
Lender the right, exercisable during the existence of an Event of Default, of offset or banker&#146;s
lien against all funds of the Borrower now or hereafter or from time to time on deposit with the
Agent and each Lender, regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds deposited in a time
deposit account prior to the maturity thereof, provided that such Obligation shall have matured,
whether by acceleration of maturity or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16 <U>General Provisions Relating to Interest.</U> (a)&nbsp;It is the intention of the parties
hereto to comply strictly with the usury laws of the State of Texas and the United States of
America. In this connection, there shall never be collected, charged, or received on the sums
advanced hereunder interest in excess of that which would accrue at the Highest Lawful Rate. For
purposes of Chapter&nbsp;303 of the Texas Finance Code (Vernon&#146;s 1999), the Borrower agrees that the
Highest Lawful Rate shall be the &#147;weekly ceiling&#148; as defined in such Section, provided that
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Lenders may also rely, to the extent permitted by applicable laws of the State of Texas or the
United States of America, on alternative maximum rates of interest under other laws of the State
of Texas or the United States of America applicable to the Lenders, if greater.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Notwithstanding anything herein or in the Notes to the contrary, during any Limitation
Period, the interest rate to be charged on amounts evidenced by the Notes shall be the Highest
Lawful Rate, and the obligation, if any, of the Borrower for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any period or periods of time
following a Limitation Period, to the extent permitted by applicable laws of the State of Texas or
the United States of America, the interest rate to be charged hereunder shall remain at the Highest
Lawful Rate until such time as there has been paid to the Lenders (i)&nbsp;the amount of interest in
excess of that accruing at the Highest Lawful Rate that the Lenders would have received during the
Limitation Period had the interest rate remained at the otherwise applicable rate, and (ii)&nbsp;all
interest and fees otherwise payable to the Lenders but for the effect of such Limitation Period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If, under any circumstances, the aggregate amounts paid on the Note or under this
Agreement or any other Loan Document include amounts which by law are deemed interest and which
would exceed the amount permitted if the Highest Lawful Rate were in effect, the Borrower
stipulates that such payment and collection will have been and will be deemed to have been, to the
extent permitted by applicable laws of the State of Texas or the United States of America, the
result of mathematical error on the part of the Borrower and the Lenders; and the Lenders shall
promptly refund the amount of such excess (to the extent only of such interest payments in excess
of that which would have accrued and been payable on the basis of the Highest Lawful Rate) upon
discovery of such error by the Lenders or notice thereof from the Borrower. In the event that the
maturity of any Obligation is accelerated, by reason of an election by the Lenders or otherwise, or
in the event of any required or permitted prepayment, then the consideration constituting interest
under applicable laws may never exceed the Highest Lawful Rate; and excess amounts paid which by
law are deemed interest, if any, shall be credited by the Lenders on the principal amount of the
Obligations, or if the principal amount of the Obligations shall have been paid in full, refunded
to the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;All sums paid, or agreed to be paid, to the Lenders for the use, forbearance and detention
of the proceeds of any advance hereunder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term hereof until paid in full so
that the actual rate of interest is uniform but does not exceed the Highest Lawful Rate throughout
the full term hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17
<U>Yield Protection.</U> (a)&nbsp;Without limiting the effect of the other provisions of
this Section (but without duplication), the Borrower shall pay to the Lenders from time to time
such amounts as the Lenders may determine are necessary to compensate it for any Additional Costs
incurred by the Lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), the Borrower shall pay to the Lenders from time to time on request such amounts as
the Lenders may determine are necessary to compensate the Lenders for any costs attributable to
the maintenance by the Lenders (or any Applicable Lending Office), pursuant to
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any Regulatory Change, of capital in respect of the Commitment, such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on assets or equity of
the Lenders (or any Applicable Lending Office) to a level below that which the Lenders (or any
Applicable Lending Office) could have achieved but for such Regulatory Change.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), in the event that any Requirement of Law or Regulatory Change or the compliance by
the Lenders therewith shall (i)&nbsp;impose, modify, or hold applicable any reserve, special deposit, or
similar requirement against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
impose upon the Lenders any other condition regarding any Letter of Credit or obligation to issue
Letters of Credit, and the result of any such event shall be to increase the cost to the Lenders of
issuing or maintaining any Letter of Credit or obligation to issue Letters of Credit or any
liability with respect to payments by the Lender under Letters of Credit, or to reduce any amount
receivable in connection therewith, then within 15&nbsp;days of demand by the Lenders, the Borrower
shall pay to the Lenders, from time to time as specified by the Lender, additional amounts which
shall be sufficient to compensate the Lenders for such increased cost or reduced amount receivable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), the Borrower shall pay to the Lenders such amounts as shall be sufficient in the
reasonable opinion of the Lenders to compensate them for any loss, cost, or expense incurred by and
as a result of:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any payment, prepayment, or conversion by the Borrower of a
LIBO Rate Loan on a date other than the last day of an Interest
Period for such Loan; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) any failure by the Borrower to borrow a LIBO Rate Loan
from the Lender on the date for such borrowing specified in the
relevant Borrowing Request;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">such compensation to include, without limitation, with respect to any LIBO Rate Loan, an amount
equal to the excess, if any, of (A)&nbsp;the amount of interest which would have accrued on the
principal amount so paid, prepaid, converted, or not borrowed for the period from the date of such
payment, prepayment, conversion, or failure to borrow to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date of such failure to borrow) at the applicable rate of
interest for such Loan provided for herein over (B)&nbsp;the interest component (as reasonably
determined by the Lenders) of the amount (as reasonably determined by the Lenders) the Lenders
would have bid in the London interbank market for Dollar deposits of amounts comparable to such
principal amount and maturities comparable to such period; provided, however, that the Lenders
shall be limited to recover their actual losses and not anticipated profits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Determinations by the Lenders for purposes of this Section of the effect of any Regulatory
Change on capital maintained, their costs or rate of return, maintaining Loans, issuing Letters of
Credit, its obligation to make Loans and issue Letters of Credit, or on amounts
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">receivable by it in respect of Loans, Letters of Credit, or such obligations, and the additional
amounts required to compensate the Lenders under this Section shall be rebuttable presumptions of
the additional amounts due, provided that such determinations are made on a reasonable basis. The
Lenders shall furnish the Borrower with a certificate setting forth in reasonable detail the basis
and amount of increased costs incurred or reduced amounts receivable as a result of any such event,
and the statements set forth therein shall be rebuttable presumptions of the additional amounts
due. The Lenders shall (i)&nbsp;notify the Borrower, as promptly as practicable after the Lender obtains
knowledge of any Additional Costs or other sums payable pursuant to this Section and determines to
request compensation therefore, of any event occurring after the Closing Date which will entitle
the Lenders to compensation pursuant to this Section; provided that the Borrower shall not be
obligated for the payment of any Additional Costs or other sums payable pursuant to this Section
after the earlier of (A)&nbsp;the Final Maturity (provided that the Obligations have been paid in full)
and (B)&nbsp;the expiration of the Commitment (provided that the Obligations have been paid in full) to
the extent such Additional Costs or other sums accrued more than 90&nbsp;days prior to the date upon
which the Borrower was given such notice; and (ii)&nbsp;designate a different Applicable Lending Office
for the Loans of the Lenders affected by such event if such designation will avoid the need for or
reduce the amount of such compensation and will not, in the sole opinion of the Lenders, be
materially disadvantageous to the Lenders. If the Lenders request compensation from the Borrower
under this Section, the Borrower may, by notice to the Lenders, require that the Loans by the
Lenders of the type with respect to which such compensation is requested be converted into Floating
Rate Loans in accordance with Section&nbsp;2.11. Any compensation requested by the Lenders pursuant to
this Section shall be due and payable to the Lender within fifteen days of delivery of any such
notice by the Lenders to the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The Lenders agree that they shall not request, and the Borrower shall not be obligated to
pay, any Additional Costs or other sums payable pursuant to this Section unless similar additional
costs and other sums payable are also generally assessed by the Lenders against other customers of
the Lenders similarly situated where such customers are subject to documents providing for such
assessment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Upon the receipt by the Borrower from any Lender (an &#147;Affected Bank&#148;) of a claim for
compensation under this Section&nbsp;2.17, the Borrower may (i)&nbsp;request the Affected Bank to use its
best efforts to obtain a replacement bank or financial institution satisfactory to the Borrower to
acquire and assume all or a ratable part of all of such Affected Bank&#146;s Loans and Commitment (a
&#147;Replacement Bank&#148;); (ii)&nbsp;request one or more of the other Lenders to acquire and assume all or
part of such Affected Bank&#146;s Loans and Commitment; or (iii)&nbsp;designate a Replacement Bank under
clause (i)&nbsp;or (iii)&nbsp;shall be subject to the prior written consent of the Agent (which consent will
not be unreasonably withheld).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18 <U>Limitation on Types of Loans.</U> Anything herein to the contrary notwithstanding,
no more than 5 separate Loans shall be outstanding at any one time, with, for purposes of this
Section, all Floating Rate Loans constituting one Loan and all LIBO Rate Loans for the same
Interest Period constituting one Loan. Anything herein to the contrary notwithstanding, if, on or
prior to the determination of any interest rate for any LIBO Rate Loan for any Interest Period
therefor:
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Lenders determine (which determination shall be conclusive) that
quotations of interest rates for the deposits referred to in the definition of &#147;LIBO
Rate&#148; in Section&nbsp;1.2 are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such Loan as provided
in this Agreement; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Lenders determine (which determination shall be conclusive) that the rates
of interest referred to in the definition of &#147;LIBO Rate&#148; in Section&nbsp;1.2 upon the basis
of which the rate of interest for such Loan for such Interest Period is to be
determined do not accurately reflect the cost to the Lenders of making or maintaining
such Loan for such Interest Period,
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">then the Lenders shall give the Borrower prompt notice thereof; and so long as such condition
remains in effect, the Lenders shall be under no obligation to make LIBO Rate Loans or to convert
Loans of any other type into LIBO Rate Loans, and the Borrower shall, on the last day of the then
current Interest Period for each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or
convert such Loan into another type of Loan in accordance with Section&nbsp;2.11. Before giving such
notice pursuant to this Section, the Lenders will designate a different available Applicable
Lending Office for LIBO Rate Loans or take such other action as the Borrower may request if such
designation or action will avoid the need to suspend the obligation of the Lender to make LIBO Rate
Loans hereunder and will not, in the opinion of the Lenders, be materially disadvantageous to the
Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19 <U>Illegality.</U> Notwithstanding any other provision of this Agreement, in the event
that it becomes unlawful for the Lenders or their Applicable Lending Office to (a)&nbsp;honor its
obligation to make any type of LIBO Rate Loans hereunder, or (b)&nbsp;maintain any type of LIBO Rate
Loans hereunder, then the Lenders shall promptly notify the Borrower thereof; and the obligation of
the Lenders hereunder to make such type of LIBO Rate Loans and to convert other types of Loans into
LIBO Rate Loans of such type shall be suspended until such time as the Lenders may again make and
maintain LIBO Rate Loans of such type, and the outstanding LIBO Rate Loans of such type shall be
converted into Floating Rate Loans in accordance with Section&nbsp;2.11. Before giving such notice
pursuant to this Section, the Lenders will designate a different available Applicable Lending
Office for LIBO Rate Loans or take such other action as the Borrower may request if such
designation or action will avoid the need to suspend the obligation of the Lenders to make LIBO
Rate Loans and will not, in the opinion of the Lenders, be disadvantageous to the Lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.20 <U>Regulatory Change.</U> In the event that by reason of any Regulatory Change, the
Lenders (a)&nbsp;incur Additional Costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the Lenders which includes deposits by
reference to which the interest rate on any LIBO Rate Loan is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lenders which includes any
LIBO Rate Loan, or (b)&nbsp;becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, at the election of the Lenders with notice to the
Borrower, the obligation of the Lenders to make such LIBO Rate Loans and to convert Floating Rate
Loans into such LIBO Rate Loans shall be suspended until such time as such Regulatory
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Change ceases to be in effect, and all such outstanding LIBO Rate Loans shall be converted into
Floating Rate Loans in accordance with Section&nbsp;2.11.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.21
<U>Limitations on Interest Periods</U>. Each Interest Period selected by the Borrower
(a)&nbsp;which commences on the last Business Day of a calendar month (or, with respect to any LIBO Rate
Loan, any day for which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent calendar month,
(b)&nbsp;which would otherwise end on a day which is not a Business Day shall end on the next succeeding
Business Day (or, with respect to any LIBO Rate Loan, if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day), (c)&nbsp;which would otherwise
commence before and end after Final Maturity shall end on Final Maturity, and (d)&nbsp;shall have a
duration of not less than thirty, sixty or ninety days, as to any LIBO Rate Loan, and, if any
Interest Period would otherwise be a shorter period, the relevant Loan shall be a Floating Rate
Loan during such period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.22
<U>Letters in Lieu of Transfer Orders</U>. The Agent agrees that none of the letters
in lieu of transfer or division orders previously provided by the Borrower will be sent to the
addressees thereof prior to the occurrence of an Event of Default, at which time the Agent may, at
its option and in addition to the exercise of any of its other rights and remedies, send any or all
of such letters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.23
<U>Power of Attorney</U>. The Borrower hereby designates the Agent as its agent and
attorney-in-fact, to act in its name, place, and stead for the purpose of completing and, upon the
occurrence of an Event of Default, delivering any and all of the letters in lieu of transfer orders
delivered by the Borrower to the Agent, including, without limitation, completing any blanks
contained in such letters and attaching exhibits thereto describing the relevant Collateral. The
Borrower hereby ratifies and confirms all that the Agent shall lawfully do or cause to be done by
virtue of this power of attorney and the rights granted with respect to such power of attorney.
This power of attorney is coupled with the interests of the Agent in the Collateral, shall commence
and be in full force and effect as of the Closing Date and shall remain in full force and effect
and shall be irrevocable so long as any Obligation remains outstanding or unpaid or any Commitment
exists. The powers conferred on the Agent by this appointment are solely to protect the interests
of the Agent under the Loan Documents and shall not impose any duty upon the Agent to exercise any
such powers. The Agent shall be accountable only for amounts that it actually receives as a result
of the exercise of such powers and shall not be responsible to the Borrower or any other Person for
any act or failure to act with respect to such powers, except for gross negligence or willful
misconduct.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE III</B></u>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><u><B>CONDITIONS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Agent and the Lenders to enter into this Agreement and to make
Loans and issue Letters of Credit are subject to the satisfaction of the following conditions
precedent:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 31 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>Receipt of Loan Documents and Other Items</U>. The Lenders shall have obligation
under this Agreement unless and until all matters incident to the consummation of transactions
contemplated herein, including, without limitation, the review by the Agent or counsel of the title
of the Borrower to its Oil and Gas Properties, shall be satisfactory to Agent, and the Agent shall
have received, reviewed, and approved the following documents and other items, appropriately executed
when necessary and, where applicable, acknowledged by one or more authorized officers of the
Borrower, all in form and substance satisfactory to the Agent and dated, where applicable, of even
date herewith or a date prior thereto and acceptable to Agent:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) multiple counterparts of this Agreement, as requested by the Agent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Notes and the Revolving Line of Credit Number 2 Notes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Security Agreement from EOWS Midland Company and Eastern Oil Well Service
Company pledging various service rigs together with Financing Statement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
unaudited Financial Statements of the Borrower as of September
30, 2006;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) engineering reports covering the Mortgaged Properties;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) certificates evidencing the insurance coverage required pursuant to Section
5.18;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) payment of the fees described in the Fee Letter Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Letter of even date from Agent, PEC and Prime OffShore L.L.C; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) such other agreements, documents, instruments, opinions, certificates,
waivers, consents, and evidence as the Agent may reasonably request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Borrower will cooperate with Agent to amend the Security Documents within 30
days from December&nbsp;28, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>Each Loan and Letter of Credit</U>. In addition to the conditions precedent stat
elsewhere herein, the Lender shall not be obligated to make any Loan or issue any Letter Credit
unless:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Borrower shall have delivered to the Agent a Borrowing Request at least
the requisite time prior to the requested date for the relevant Loan, or a Letter of
Credit Application at least three Business Days prior to the requested issuance date
for the relevant Letter of Credit; and each statement or certification made in such
Borrowing Request or Letter of Credit Application, as
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --> - 32 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the case may be, shall be true and correct in all material respects on the requested date for such
Loan or the issuance of such Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) no Event of Default or Default shall exist or will occur as a result of the making of the
requested Loan or the issuance of the requested Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if requested by the Agent, the Borrower shall have delivered evidence satisfactory to the
Agent substantiating any of the material matters contained in this Agreement which are necessary to
enable the Borrower to qualify for such Loan or the issuance of such Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) no event shall have occurred which, in the reasonable opinion of the Agent or any of the
Lenders, would have a Material Adverse Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) each of the representations and warranties contained in this Agreement shall be true and
correct and shall be deemed to be repeated by the Borrower as if made on the requested date for
such Loan or the issuance of such Letter of Credit (except to the extent such representations and
warranties expressly refer to an earlier date, in which case, they shall be true and correct as of
such earlier date) provided, however, for purposes of this Section&nbsp;3.2, in each representation and
warranty in Article&nbsp;IV that makes reference to an Exhibit, the representation under this Section
3.2 that such representation and warranty in Article&nbsp;IV is true on and as of the date of the making
of such Loan or the issuance of such Letter of Credit shall take into account (i)&nbsp;any subsequent
amendments to any Exhibit referred to therein, (ii)&nbsp;any exception contained in a written notice
received by the Agent which makes specific reference to the applicable Exhibit, or (iii)&nbsp;any
written disclosure made by the Borrower or any of its Subsidiaries prior to the date as of which
such representation or warranty is made, provided that such amendment, exception or disclosure has
been consented to by the Required Banks if such amendment, exception or disclosure amends or waives
provisions of this Agreement or is otherwise required under the terms of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all of the Security Instruments shall be in full force and effect and provide to the
Lenders the security intended thereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) neither the consummation of the transactions contemplated hereby nor the making of such
Loan or the issuance of such Letter of Credit shall contravene, violate, or conflict with any
Requirement of Law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Borrower shall hold full legal title to the Collateral and be the sole beneficial
owner thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Agent and the Lenders shall have received the payment of all fees payable to the
Agent and the Lenders hereunder and reimbursement from the Borrower, or special legal counsel for
the Agent shall have received payment
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 33 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">from the Borrower, for (i)&nbsp;all reasonable fees and expenses of counsel to the Agent
for which the Borrower is responsible pursuant to applicable provisions of this
Agreement and for which invoices have been presented at least 15&nbsp;days prior to the
date of the relevant Loan or Letter of Credit Application (otherwise the initial
Borrowing which must be presented at least five days prior to the Closing Date), and
(ii)&nbsp;estimated fees charged by filing officers and other public officials incurred
or to be incurred in connection with the filing and recordation of any Security
Instruments, for which invoices have been presented as of or prior to the date of
the requested Loan or Letter of Credit Application (otherwise the initial Borrowing
which must be presented at least five days prior to the Closing Date); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) all matters incident to the consummation of the transactions hereby
contemplated shall be satisfactory to the Agent and each Lender.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IV</B></u>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><u> <B>REPRESENTATIONS AND WARRANTIES</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To induce the Agent and the Lenders to enter into this Agreement and to make the Loans
and issue Letters of Credit, the Borrower represents and warrants to the Agent and each Lender
(which representations and warranties shall survive the delivery of the Notes) that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1
<U>Due Authorization</U>. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the Borrower of the Notes,
the repayment of the Notes and interest and fees provided for in the Notes and this Agreement, the
execution and delivery of the Security Instruments by the Borrower and the performance of all
obligations of the Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do not and will not (a)
require the consent of any Governmental Authority, (b)&nbsp;contravene or conflict with any Requirement
of Law, (c)&nbsp;except as shown on Exhibit&nbsp;V, contravene or conflict with any indenture, instrument, or
other agreement to which the Borrower is a party or by which any Property of the Borrower may be
presently bound or encumbered, except where such contravention or conflict would not individually
or in the aggregate result in a Material Adverse Effect, or (d)&nbsp;result in or require the creation
or imposition of any Lien in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2
<U>Corporate Existence</U>. The Borrowers are corporations duly organized, legally
existing, and in good standing under the laws of their state of incorporation and are duly
qualified as foreign corporations and are in good standing in all jurisdictions wherein the
ownership of Property or the operation of their business necessitates same, other than those
jurisdictions wherein the failure to so qualify will not have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3
<U>Valid and Binding Obligations</U>. All Loan Documents, when duly executed and
delivered by the Borrower, will be the legal, valid, and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms except as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 34 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors&#146; rights generally or by equitable principles relative to enforceability.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
<U>Security Instruments</U>. The provisions of each Security Instrument are effective to
create in favor of the Agent for the benefit of the Lender, a legal, valid, and enforceable Lien in
all right, title, and interest of the Borrower in the Collateral described therein, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors&#146; rights generally or by equitable principles relative to enforceability,
which Liens, assuming the accomplishment of recording and filing in accordance with applicable laws
prior to the intervention of rights of other Persons, shall constitute fully perfected first- priority Liens on all right, title, and interest of the Borrower in the Collateral described
therein subject to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5
<U>Title to Assets</U>. The Borrower has good and indefeasible title to all of its
interests in its Properties then owned by it, free and clear of all Liens except Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6
<U>No Material Misstatements</U>. As of the Closing Date, no information, exhibit,
statement, or report furnished to the Agent by or at the direction of the Borrower in connection
with this Agreement contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading as of the date made or
deemed made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
<U>Liabilities, Litigation, and Restrictions</U>. As of the Closing Date, other than as
listed under the heading &#147;Liabilities&#148; on Exhibit&nbsp;V attached hereto, the Borrower has no
liabilities, direct, or contingent, which would result in a Material Adverse Effect, except as set
forth under the heading &#147;Litigation&#148; on Exhibit&nbsp;V hereto, no litigation or other action of any
nature affecting the Borrower is pending before any Governmental Authority or, to the best
knowledge of the Borrower, threatened against or affecting the Borrower which might reasonably
be expected to result in any material impairment of its ownership of any Collateral or have a
Material Adverse Effect. To the best knowledge of the Borrower, after due inquiry, no unusual or
unduly burdensome restriction, restraint or hazard exists by contract, Requirement of Law, or
otherwise relative to the business or operations of the Borrower or the ownership and operation of
the Collateral would result in a Material Adverse Effect, other than such as relate generally to
Persons engaged in business activities similar to those conducted by the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8
<U>Authorizations; Consents</U>. Except as expressly contemplated by this Agreement, no
authorization, consent, approval, exemption, franchise, permit, or license of, or filing with, any
Governmental Authority or any other Person is required to authorize or is otherwise required in
connection with the valid execution and delivery by the Borrower of the Loan Documents or any
instrument contemplated hereby, the repayment by the Borrower of the Note and interest and fees
provided in the Note and this Agreement, or the performance by the Borrower of the Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9
<U>Compliance with Laws</U>. The Borrower and its Property, including, without
limitation, the Mortgaged Property, are in compliance with all material applicable Requirements of
Law, including, without limitation, Environmental Laws, the Natural Gas Policy Act of 1978,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 35 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">as amended, and ERISA, except to the extent non-compliance with any such Requirements of Law could
not reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10
<U>ERISA</U>. No Reportable Event has occurred with respect to any Single Employer
Plan, and each Single Employer Plan has complied with and been administered in all material
respects in accordance with applicable provisions of ERISA and the Code. To the best knowledge
of the Borrower, (a)&nbsp;no Reportable Event has occurred with respect to any Multiemployer Plan, and
(b)&nbsp;each Multiemployer Plan has complied with and been administered in all material respects with
applicable provisions of ERISA and the Code. The present value of all benefits vested under each
Single Employer Plan maintained by the Borrower or any Commonly Controlled Entity (based on the
assumptions used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed the value of the assets of such Plan allocable to such vested benefits. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan for which there is any withdrawal liability. As of the most recent valuation
date applicable to any Multiemployer Plan, neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or such Commonly Controlled
Entity were to withdraw completely from such Multiemployer Plan. Neither the Borrower nor any
Commonly Controlled Entity has received notice that any Multiemployer Plan is Insolvent or in
Reorganization. To the best knowledge of the Borrower, no such Insolvency or Reorganization is
reasonably likely to occur. Based upon GAAP existing as of the date of this Agreement and current
factual circumstances, the Borrower has no reason to believe that the annual cost during the term
of this Agreement to the Borrower and all Commonly Controlled Entities for post-retirement benefits
to be provided to the current and former employees of the Borrower and all Commonly Controlled
Entities under Plans which are welfare benefit plans (as defined in Section&nbsp;3(1) of ERISA) will, in
the aggregate, have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11
<U>Environmental Laws</U>. To the best knowledge and belief of the Borrower, except as
would not have a Material Adverse Effect, or as described on Exhibit&nbsp;V under the heading
&#147;Environmental Matters:&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) no Property of the Borrower is currently on or has ever been on, or is
adjacent to any Property which is on or has ever been on, any federal or state list of
Superfund Sites;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) no Hazardous Substances have been generated, transported, and/or disposed of
by the Borrower at a site which was, at the time of such generation, transportation,
and/or disposal, or has since become, a Superfund Site;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) except in accordance with applicable Requirements of Law or the terms of a
valid permit, license, certificate, or approval of the relevant Governmental
Authority, no Release of Hazardous Substances by the Borrower or from, affecting, or
related to any Property of the Borrower or adjacent to any Property of the Borrower has
occurred; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) no Environmental Complaint has been received by the Borrower.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12 <U>Compliance with Federal Reserve Regulations</U>. No transaction contemplated by the
Loan Documents is in violation of any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, T, U, or X.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13 <U>Investment Company Act Compliance</U>. The Borrower is not, nor is the Borrower
directly or indirectly controlled by or acting on behalf of any Person which is, an &#147;investment
company&#148; or an &#147;affiliated person&#148; of an &#147;investment company&#148; within the meaning of the Investment
Company Act of 1940, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14 <U>Proper Filing of Tax Returns; Payment of Taxes Due</U>. The Borrower has duly and
properly filed its United States income tax return and all other tax returns which are required to
be filed and has paid all taxes due except such as are being contested in good faith and as to
which adequate provisions and disclosures have been made. The respective charges and reserves on
the books of the Borrower with respect to taxes and other governmental charges are adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15 <U>Refunds</U>. Except as described on Exhibit&nbsp;V under the heading &#147;Refunds,&#148; no
orders of, proceedings pending before, or other requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission, or any Governmental Authority exist which could result
in the Borrower being required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons constituting part of the Mortgaged Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16 <U>Gas Contracts</U>. Except as described on Exhibit&nbsp;V under the heading &#147;Gas
Contracts,&#148; the Borrower (a)&nbsp;is not obligated in any material respect by virtue of any prepayment
made under any contract containing a &#147;take-or-pay&#148; or &#147;prepayment&#148; provision or under any similar
agreement to deliver hydrocarbons produced from or allocated to any of the Mortgaged Property at
some future date without receiving full payment therefor within 90&nbsp;days of delivery, and (b)&nbsp;has
not produced gas, in any material amount, subject to, and neither the Borrower nor any of the
Mortgaged Properties is subject to, balancing rights of third parties or subject to balancing
duties under governmental requirements, except as to such matters for which the Borrower has
reflected in the most recent engineering report or established monetary reserves adequate in amount
to satisfy such obligations and has segregated such reserves from other accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17 <U>Intellectual Property</U>. The Borrower owns or is licensed to use all Intellectual
Property necessary to conduct all business material to its condition (financial or otherwise),
business, or operations as such business is currently conducted. No claim has been asserted or is
pending by any Person with the respect to the use of any such Intellectual Property or challenging
or questioning the validity or effectiveness of any such Intellectual Property; and the Borrower
knows of no valid basis for any such claim. The use of such Intellectual Property by the Borrower
does not infringe on the rights of any Person, except for such claims and infringements as do not,
in the aggregate, give rise to any material liability on the part of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18 <U>Casualties or Taking of Property</U>. Except as disclosed on Exhibit&nbsp;V under the
heading &#147;Casualties,&#148; except as would not result in a Material Adverse Effect, neither the business
nor any Property of the Borrower has been materially adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other labor
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 37 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">disturbance, embargo, requisition or taking of Property, or cancellation of contracts, permits, or
concessions by any Governmental Authority, riot, activities of armed forces, or acts of God.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19 <U>Locations of Borrower</U>. The principal place of business and chief executive office
of the Borrower is located at the address of the Borrower set forth in Section&nbsp;9.3 or at such other
location as the Borrower may have, by proper written notice hereunder, advised the Lender, provided
that such other location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.20 <U>Subsidiaries</U>. As of the Closing Date, the Borrower has no Subsidiaries except
those described on Exhibit&nbsp;V under the heading &#147;Subsidiaries&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.21 <U>Financial Statements</U>. The Borrower has heretofore furnished to the Lenders the
following financial statements: its audited consolidated balance sheet, consolidated statements
of operations, consolidated statements of cash flows and consolidated statements of changes in
common stock and other shareholder&#146;s equity as of and for the fiscal years ended 2004 and 2005.
Such financial statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its 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. Since September&nbsp;30, 2006,
there has been no development, circumstance or event that has had or could reasonably be expected
to have a Material Adverse Effect.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>ARTICLE
V</U></B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B><U>
AFFIRMATIVE COVENANTS</U></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as any Obligation remains outstanding or unpaid or any Commitment exists, the
Borrower shall:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance and Access to Records</U>. Keep adequate records, in accordance with GAAP,
of all its transactions so that at any time, and from time to time, its true and complete financial
condition may be readily determined, and promptly following the reasonable request of the Agent,
make such records available for inspection by the Agent and, at the expense of the Borrower, allow
the Agent to make and take away copies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Quarterly Financial Statements; Compliance Certificates</U>. Deliver to the Agent,
(a)&nbsp;on or before the 45th day after the close of each of the first three quarterly periods of each
fiscal year of the Borrower, a copy of the unaudited consolidated Financial Statements of PEC and
its Subsidiaries and Affiliates as at the close of such quarterly period and from the beginning of
such fiscal year to the end of such period, such Financial Statements to be certified by a
Responsible Officer of the Borrower as having been prepared in accordance with GAAP consistently
applied and as a fair presentation of the condition of the Borrower, subject to changes resulting
from normal year-end audit adjustments, and (b)&nbsp;on or before the 60th day after the close of each
fiscal quarter, with the exception of the last fiscal quarter, a Compliance Certificate.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 38 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Annual Financial Statements</U>. Deliver to the Agent, on or before the 90th day
after the close of each fiscal year of the Borrower, a copy of the annual audited consolidated
Financial Statements of PEC and its Subsidiaries and Affiliates and a Compliance Certificate on or
before the 105<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day after the close of each fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4
<U>Oil and Gas Reserve Reports</U>. (a)&nbsp;Deliver to the Agent no later than May 1 of each
year during the term of this Agreement, engineering reports in form and substance satisfactory to
the Agent, certified by Ryder Scott Company or by any nationally or regionally- recognized
independent consulting petroleum engineers acceptable to the Agent, as fairly and accurately
setting forth (i)&nbsp;the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas
reserves (separately classified as such) attributable to the Mortgaged Properties as of January 1
of the year for which such reserve reports are furnished, (ii)&nbsp;the aggregate present value of the
future net income with respect to such Mortgaged Properties, discounted at a stated per annum
discount rate of proven and producing reserves, (iii)&nbsp;projections of the annual rate of production,
gross income, and net income with respect to such proven and producing reserves, and (iv)
information with respect to the &#147;take-or-pay,&#148; &#147;prepayment,&#148; and gas-balancing liabilities of the
Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Deliver to the Agent no later than November 1 of each year during the term of this
Agreement, engineering reports in form and substance satisfactory to the Agent prepared by or under
the supervision of any nationally or regionally-recognized independent consulting petroleum
engineer evaluating the Mortgaged Properties as of July 1 of the year for which such reserve
reports are furnished and updating the information provided in the reports pursuant to Section
5.4(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Each of the reports provided pursuant to this Section shall be submitted to the Agent
together with additional data concerning pricing, quantities of production from the Mortgaged
Properties, volumes of production sold, purchasers of production, gross revenues, expenses, and
such other information and engineering and geological data with respect thereto as the Agent may
reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5
<U>Title Opinions; Title Defects: Mortgaged Property</U>. Promptly upon the request of
the Agent, furnish to the Agent title opinions, in form and substance and by counsel satisfactory
to the Agent, or other confirmation of title acceptable to the Agent, covering Oil and Gas
Properties constituting not less than 80% of the present value, determined by the Agent in its sole
discretion, of its Oil and Gas Properties included in the Borrowing Base; and promptly, but in any
event within 60&nbsp;days after notice by the Agent of any defect, material in the opinion of the Agent
in value, in the title of the Borrower to any of its Oil and Gas Properties, clear such title
defects, and, in the event any such title defects are not cured in a timely manner, pay all related
costs and fees incurred by the Agent to do so. Borrower further agrees to provide Agent, at all
times during the term of this Agreement with valid first lien mortgages on 80% of the present
value, determined by the Agent in its sole discretion, of all its Oil and Gas Properties, included
in the Borrowing Base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Notices of Certain Events</U>. Deliver to the Agent, immediately upon having
knowledge of the occurrence of any of the following events or circumstances, a written statement
with respect thereto, signed by a Responsible Officer of the Borrower and setting forth the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 39 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">relevant event or circumstance and the steps being taken by the Borrower with respect to such event
or circumstance:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any Default or Event of Default;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any default or event of default under any contractual obligation of the
Borrower, or any litigation, investigation, or proceeding between the Borrower
and any Governmental Authority which, in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material Adverse
Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any litigation or proceeding involving the Borrower as a defendant or in which
any Property of the Borrower is subject to a claim and in which the amount involved is
$500,000 or more and which is not covered by insurance or in which injunctive or
similar relief is sought;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the receipt by the Borrower of any Environmental Complaint;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) any actual, proposed, or threatened testing or other investigation by any
Governmental Authority or other Person concerning the environmental condition of, or
relating to, any Property of the Borrower or adjacent to any Property of the Borrower
following any allegation of a violation of any Requirement of Law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) any Release of Hazardous Substances by the Borrower or from, affecting, or
related to any Property of the Borrower or adjacent to any Property of the Borrower
except in accordance with applicable Requirements of Law or the terms of a valid
permit, license, certificate, or approval of the relevant Governmental
Authority, or the violation of any Environmental Law, or the revocation, suspension, or
forfeiture of or failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material Adverse Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the change in identity or address of any Person remitting to the Borrower
proceeds from the sale of hydrocarbon production from or attributable to any Mortgaged
Property;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) any change in the senior management of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Reportable Event or imminently expected Reportable Event with respect
to any Plan; any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan; the institution of proceedings or the taking of any
other action by the PBGC, the Borrower or any Commonly Controlled Entity or
Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan; or
any Prohibited Transaction in connection with any plan or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">any trust created thereunder and the action being taken by the Internal Revenue
Service with respect thereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) any pledge of Oil and Gas Property by the partnerships listed on Exhibit&nbsp;A
to the document listed in Section&nbsp;3.1(g)(vi) of the Existing Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) any other event or condition which could reasonably be expected to have a
Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <U>Letters in Lieu of Transfer Orders; Division Orders</U>. Promptly upon request by
the Agent at any time and from time to time, execute such letters in lieu of transfer orders, in
addition to the letters signed by the Borrower and delivered to the Agent in satisfaction of the
condition set forth in Section&nbsp;3. l(g)(iii) of the Existing Agreement and/or division and/or
transfer orders as are necessary or appropriate to transfer and deliver to the Agent proceeds from
or attributable to any Mortgaged Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 <U>Additional Information</U>. Furnish to the Agent, promptly upon the request of the
Agent, such additional financial or other information concerning the assets,
liabilities, operations, and transactions of the Borrower as the Agent may from time to time
request; and notify the Agent not less than ten Business Days prior to the occurrence of any
condition or event that may change the proper location for the filing of any financing statement or
other public notice or recording for the purpose of perfecting a Lien in any Collateral, including,
without limitation, any change in its name or the location of its principal place of business or
chief executive office; and upon the request of the Agent, execute such additional Security
Instruments as may be necessary or appropriate in connection therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9 <U>Compliance with Laws</U>. Except to the extent the failure to comply or cause
compliance would not have a Material Adverse Effect, comply with all applicable Requirements of
Law, including, without limitation, (a)&nbsp;the Natural Gas Policy Act of 1978, as amended, (b)&nbsp;ERISA,
(c)&nbsp;Environmental Laws, and (d)&nbsp;all permits, licenses, registrations, approvals, and authorizations
(i)&nbsp;related to any natural or environmental resource or media located on, above, within, in the
vicinity of, related to or affected by any Property of the Borrower, (ii)&nbsp;required for the
performance of the operations of the Borrower, or (iii)&nbsp;applicable to the use, generation,
handling, storage, treatment, transport, or disposal of any Hazardous Substances; and cause all
employees, crew members, agents, contractors, subcontractors, and future lessees (pursuant to
appropriate lease provisions) of the Borrower, while such Persons are acting within the scope of
their relationship with the Borrower, to comply with all such Requirements of Law as may be
necessary or appropriate to enable the Borrower to so comply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10 <U>Payment of Assessments and Charges</U>. Pay all taxes, assessments, governmental
charges, rent, and other Indebtedness which, if unpaid, might become a Lien against the Property of
the Borrower, except any of the foregoing being contested in good faith and as to which adequate
reserve in accordance with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
</DIV>


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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11 <U>Maintenance of Corporate Existence and Good Standing</U>. Maintain its
corporate existence or qualification and good standing in its jurisdictions of incorporation or
formation and in all jurisdictions wherein the Property now owned or hereafter acquired or business
now or hereafter conducted necessitates same, unless the failure to do so would not have a Material
Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12 <U>Payment of Notes; Performance of Obligations</U>. Pay the Notes according to the
reading, tenor, and effect thereof, as modified hereby, and do and perform every act and discharge
all of its other Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13 <U>Further Assurances</U>. Promptly cure any defects in the execution and delivery of
any of the Loan Documents and all agreements contemplated thereby, and execute,
acknowledge, and deliver such other assurances and instruments as shall, in the opinion of the
Lender, be necessary to fulfill the terms of the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14 <U>Initial Fees and Expenses of Counsel to Agent</U>. Upon request by the Agent,
promptly reimburse the Agent for all reasonable fees and expenses of Jackson Walker L.L.P., special
counsel to the Agent, in connection with the preparation of this Agreement and all documentation
contemplated hereby, the satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions contemplated in this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15 <U>Subsequent Fees and Expenses of Agent and Lenders</U>. Upon request by the Agent or
Lenders, promptly reimburse the Agent or Lenders (to the fullest extent permitted by law) for all
amounts reasonably expended, advanced, or incurred by or on behalf of the Agent or Lenders to
satisfy any obligation of the Borrower under any of the Loan Documents; to collect the Obligations;
to ratify, amend, restate, or prepare additional Loan Documents, as the case may be; for the filing
and recordation of Security Instruments; to enforce the rights of the Agent or Lenders under any of
the Loan Documents; and to protect the Properties or business of the Borrower, including, without
limitation, the Collateral, which amounts shall be deemed compensatory in nature and liquidated
as to amount upon notice to the Borrower by the Agent or Lenders and which amounts shall include,
but not be limited to (a)&nbsp;all court costs, (b)&nbsp;reasonable attorneys&#146; fees, (c)&nbsp;reasonable fees and
expenses of auditors and accountants incurred to protect the interests of the Agent or Lenders, (d)
fees and expenses incurred in connection with the participation by the Agent or Lenders as a member
of the creditors&#146; committee in a case commenced under any Insolvency Proceeding, (e)&nbsp;fees and
expenses incurred in connection with lifting the automatic stay prescribed in &#167;362 Title 11 of the
United States Code, and (f)&nbsp;fees and expenses incurred in connection with any action pursuant to
&#167;1129 Title 11 of the United States Code all reasonably incurred by the Agent or Lenders in
connection with the collection of any sums due under the Loan Documents, together with interest at
the per annum interest rate equal to the Floating Rate, calculated on a basis of a calendar year of
365 or 366&nbsp;days, as the case may be, counting the actual number of days elapsed, on each such
amount from the date of notification that the same was expended, advanced, or incurred by the Agent
or Lenders until the date it is repaid to the Agent or Lenders, with the obligations under this
Section surviving the non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator
of the Borrower appointed in any such case.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16 <U>Operation of Oil and Gas Properties</U>. Develop, maintain, and operate its Oil and
Gas Properties in a prudent and workmanlike manner in accordance with industry standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.17 <U>Maintenance and Inspection of Properties</U>. Maintain all of its tangible
Properties in good repair and condition, ordinary wear and tear excepted; make all necessary
replacements thereof and operate such Properties in a good and workmanlike manner; and permit any
authorized representative of the Lender to visit and inspect, at the expense of the Borrower, any
tangible Property of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.18 <U>Maintenance of Insurance</U>. Maintain insurance with respect to its Properties and
businesses against such liabilities, casualties, risks, and contingencies as is customary in the
relevant industry and sufficient to prevent a Material Adverse Effect, all such insurance to be in
amounts and from insurers acceptable to the Agent, or as required by law of any state or
jurisdiction in which the Borrower does business maintained by Borrower, naming the Agent as loss
payee, and additional insured and, upon any renewal of any such insurance and at other times upon
request by the Agent, furnish to the Agent evidence, satisfactory to the Agent, of the maintenance
of such insurance. The Borrower will give the Agent 30&nbsp;days prior written notice of intent to
cancel or modify any such insurance. The Agent shall have the right to collect, and the Borrower
hereby assigns to the Agent, any and all monies that may become payable under any policies of
insurance relating to business interruption, if any, or by reason of damage, loss, or destruction
of any of the Collateral. In the event of any damage, loss, or destruction for which insurance
proceeds relating to business interruption, if any, or Collateral exceed $500,000, the Agent may,
at its option, apply all such sums or any part thereof received by it toward the payment of the
Obligations, whether matured or unmatured, application to be made first to interest and then to
principal, and shall deliver to the Borrower the balance, if any, after such application has been
made. In the event of any such damage, loss, or destruction for which insurance proceeds are
$500,000 or less, provided that no Default or Event of Default has occurred and is continuing, the
Agent shall deliver any such proceeds received by it to the Borrower. In the event the Agent
receives insurance proceeds not attributable to Collateral or business interruption, the Agent
shall deliver any such proceeds to the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.19 <U>INDEMNIFICATION</U>. (a)&nbsp;THE BORROWER SHALL INDEMNIFY THE AGENT, AND EACH LENDER,
AS A LENDER OR AS AN ISSUER OF A LETTER OF CREDIT, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN &#147;<U>INDEMNITEE</U>&#148;) 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)&nbsp;THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR
INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO
ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii)
THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY
LOAN DOCUMENT,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii)&nbsp;ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH,
(iv)&nbsp;ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (v)&nbsp;ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, (vi)&nbsp;THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii)&nbsp;ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii)&nbsp;ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE,
TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix)&nbsp;THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY,
(x)&nbsp;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)&nbsp;THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL,
GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT OR 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)&nbsp;ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii)&nbsp;ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE
LOAN DOCUMENTS, OR (xiv)&nbsp;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)&nbsp;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 RESULTED FROM THE BREACH
OF ANY OBLIGATION OF SUCH
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INDEMNITEE UNDER ANY LOAN DOCUMENT OR THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR
VIOLATION OF LAW OF SUCH INDEMNITEE.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.20 <U>Partnership Debt</U>. No Oil and Gas Properties of the partnerships in which
PrimeEnergy Corporation and PrimeEnergy Management Corporation own general or limited partnership
interest and which have been pledged to the Agent by the document described in Section&nbsp;3.1(d) in
the Existing Agreement have been mortgaged.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VI </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>NEGATIVE COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as any Obligation remains outstanding or unpaid or any Commitment exists, the
Borrower will not:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Indebtedness</U>. Create, incur, assume, or suffer to exist any Indebtedness in excess
of $1,500,000, whether by way of loan or otherwise; provided, however, the foregoing restriction
shall not apply to (a)&nbsp;the Obligations, (b)&nbsp;unsecured accounts payable incurred in the ordinary
course of business, which are not unpaid in excess of 60&nbsp;days beyond invoice date or are being
contested in good faith and as to which such reserve as is required by GAAP has been made , (c)
Commodity Hedge Agreements, in form and substance and with a Person acceptable to the Lender,
provided that (i)&nbsp;each commitment issued under such agreement must also be approved by the Lender,
(ii)&nbsp;such agreements shall not be entered into with respect to Mortgaged Properties constituting
more than 80% of monthly production of proven producing reserves as forecast in Agent&#146;s most recent
engineering evaluation, and (iv)&nbsp;the Agent shall receive a security interest in the Commodity Hedge
Agreements, or (d)&nbsp;Rate Management Transactions, in form and substance and with a Person acceptable
to the Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Contingent Obligations</U>. Create, incur, assume, or suffer to exist any Contingent
Obligation; provided, however, the foregoing restriction shall not apply to (a)&nbsp;performance
guarantees and performance surety or other bonds provided in the ordinary course of business, or
(b)&nbsp;trade credit incurred or operating leases entered into in the ordinary course of business or
(c)&nbsp;the outstanding guarantee in the amount of $125,000 to Alabama Shopping Center Associates, (d)
the Put Right Agreement by and between PEC and Prime Offshore L.L.C. dated as of June&nbsp;29, 2006, or
(e)&nbsp;shareholder loans to Prime Offshore L.L.C. provided, however, that Borrower must maintain the
greater of 10% of the sum of the Borrowing Base and the Revolving Line of Credit Number 2 Available
Commitment or $10,000,000 subsequent to any such shareholder loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Liens</U>. Create, incur, assume, or suffer to exist any Lien on any of its Oil and
Gas Properties or any other Property, whether now owned or hereafter acquired; provided, however,
the foregoing restrictions shall not apply to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Sales of Assets</U>. Without the prior written consent of the Lenders, sell, transfer,
or otherwise dispose of, in one or any series of transactions within any 12-month period, assets,
whether now owned or hereafter acquired, the book value of which exceeds $250,000 in the aggregate
or enter into any agreement to do so; <U>provided</U>, <U>however</U>, the foregoing restriction
shall
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">not apply to the sale of hydrocarbons or inventory in the ordinary course of business or the sale
or other disposition of Property destroyed, lost, worn out, damaged or having only salvage value
or no longer used or useful in the business of Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Leasebacks</U>. Enter into any agreement to sell or transfer any Property and
thereafter rent or lease as lessee such Property or other Property intended for the same use or
purpose as the Property sold or transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Loans or Advances</U>. Make or agree to make or allow to remain outstanding any loans
or advances to any Person; provided, however, the foregoing restrictions shall not apply to
(a)&nbsp;advances or extensions of credit in the form of accounts receivable incurred in the ordinary
course of business and upon terms common in the industry for such accounts receivable, or (b)&nbsp;advances
to employees of the Borrower for the payment of expenses in the ordinary course of business, and
(c)&nbsp;loans or advances to any oil and gas limited partnership for which the Borrower is the managing
general partner and any business trust formed in the ordinary course of business of the Borrowers
for which the Borrower is the managing trustee, provided that no default or event of default exists
under any material contractual obligation of such partnership or trust.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Investments</U>. Acquire Investments in, or purchase or otherwise acquire all or
substantially all of the assets of, any Person; provided, however, the foregoing restriction shall
not apply to the purchase or acquisition of (a)&nbsp;Oil and Gas Properties, (b)&nbsp;Investments in the form
of (i)&nbsp;debt securities issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality thereof, with maturities of no more than one year, (ii)
commercial paper of a domestic issuer rated at the date of acquisition at least P-2 by Moody&#146;s
Investor Service, Inc. or A-2 by Standard &#038; Poor&#146;s Corporation and with maturities of no more than
one year from the date of acquisition, or (iii)&nbsp;repurchase agreements covering debt securities or
commercial paper of the type permitted in this Section, certificates of deposit, demand deposits,
eurodollar time deposits, overnight bank deposits and bankers&#146; acceptances, with maturities of no
more than one year from the date of acquisition, issued by or acquired from or through the Lender
or any bank or trust company organized under the laws of the United States or any state thereof and
having capital surplus and undivided profits aggregating at least $100,000,000, (c)&nbsp;other
short-term Investments similar in nature and degree of risk to those described in clause (b)&nbsp;of
this Section, or (d)&nbsp;money-market funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Dividends and Distributions</U>. Declare, pay, or make, whether in cash or Property of
the Borrower, any dividend or distribution on, or purchase, redeem, or otherwise acquire for value,
any share of any class of its capital stock, except that the foregoing restriction shall not apply
to dividends paid in capital stock of the Borrower or the purchase of capital stock of PEC for an
amount not exceeding $10,000,000 in 2006 and 2007 and not to exceed $1,000,000 in any 12-month
period thereafter provided that no Default or Event of Default exists or will occur as the result
of such purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 <U>Issuance of Stock; Changes in Corporate Structure</U>. Issue or agree to issue
additional shares of capital stock, in one or any series of transactions; enter into any
transaction of consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or suffer
any liquidation or dissolution).
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10 <U>Transactions with Affiliates</U>. Directly or indirectly, enter into any
transaction (including the sale, lease, or exchange of Property or the rendering of service)
with any of its Affiliates, other than upon fair and reasonable terms no less favorable than could
be obtained in an arm&#146;s length transaction with a Person which was not an Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11 <U>Lines of Business</U>. Expand, on its own or through any Subsidiary, into any line of
business other than those in which the Borrower is engaged as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12 <U>ERISA Compliance</U>. Permit any Plan maintained by it or any Commonly Controlled
Entity to (a)&nbsp;engage in any Prohibited Transaction, (b)&nbsp;incur any &#147;accumulated funding deficiency,&#148;
as such term is defined in Section&nbsp;302 of ERISA, or (c)&nbsp;terminate in a manner which could result in
the imposition of a Lien on any Property of the Borrower pursuant to Section&nbsp;4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any Person or the assets
of any Person which has now or has had at any time an obligation to contribute to any Multiemployer
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13 <U>Interest Coverage Ratio</U>. Permit, as of the close of any fiscal quarter, the ratio
of (a)&nbsp;quarterly EBITDAX on a trailing four-quarter basis to (b)&nbsp;Interest Expense to be less than
3.00 to 1.00, measured on a trailing four-quarter basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14 <U>Current Ratio</U>. Permit, as of the close of any fiscal quarter, the ratio of
Current Assets to Current Liabilities to be less than 1.00 to 1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15 <U>Tangible Net Worth</U>. Permit Tangible Net Worth, as of the close of any fiscal
quarter, to be less than $40,000,000 at September&nbsp;30, 2006, plus 75% of positive quarterly net
income thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16 <U>Bank Debt Coverage Ratio</U>. Permit, as of the close of any fiscal quarter, the
ratio of (a)&nbsp;Bank Debt to (b)&nbsp;EBITDAX to be greater than 4.00 to 1.00, measured on a trailing four-
quarter basis.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VII </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>EVENTS OF DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Enumeration of Events of Default</U>. Any of the following events shall
constitute an Event of Default:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) default shall be made in the payment when due of any installment of principal
or interest under this Agreement or the Notes or in the payment when due of any fee or
other sum payable under any Loan Document and such default as to interest or fees only
shall have continued for three days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) default shall be made by the Borrower in the due observance or performance of
any of their respective obligations under the Loan Documents, and such default shall
continue for 30&nbsp;days after the earlier of notice thereof to the Borrower by the Agent
or knowledge thereof by the Borrower;
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any representation or warranty made by the Borrower in any of the Loan Documents proves to
have been untrue in any material respect or any representation, statement (including Financial
Statements), certificate, or data furnished or made to the Agent in connection herewith proves to
have been untrue in any material respect as of the date the facts therein set forth were stated or
certified;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;default shall be made by the Borrower (as principal or guarantor or other surety) in the
payment or performance of any bond, debenture, note, or other Indebtedness or under any
credit agreement, loan agreement, indenture, promissory note, or similar agreement or
instrument executed in connection with any of the foregoing, and such default shall remain
unremedied for in excess of the period of grace, if any, with respect thereto;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;the Borrower shall be unable to satisfy any condition or cure any circumstance specified
in Article&nbsp;III, the satisfaction or curing of which is precedent to the right of the Borrower to
obtain a Loan or the issuance of a Letter of Credit and such inability shall continue for a period
in excess of 30&nbsp;days;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;either the Borrower shall (i)&nbsp;apply for or consent to the appointment of a receiver,
trustee, or liquidator of it or all or a substantial part of its assets, (ii)&nbsp;file a voluntary
petition commencing an Insolvency Proceeding, (iii)&nbsp;make a general assignment for the benefit of
creditors, (iv)&nbsp;be unable, or admit in writing its inability, to pay its debts generally as they
become due, or (v)&nbsp;file an answer admitting the material allegations of a petition filed against it
in any Insolvency Proceeding;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;an order, judgment, or decree shall be entered against either the Borrower by any court of
competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator,
custodian, or liquidator of it or all or any substantial part of its assets, and such order,
judgment, or decree shall not be dismissed or stayed within 60&nbsp;days;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;the levy against any significant portion of the property of the Borrower, or any
execution, garnishment, attachment, sequestration, or other writ or similar proceeding which is
not permanently dismissed or discharged within 30&nbsp;days after the levy;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;a final and non-appealable order, judgment, or decree shall be entered against the
Borrower for money damages and/or Indebtedness due in an amount in excess of $500,000, except as
disclosed on the Closing Date in Exhibit&nbsp;V and such order, judgment, or decree shall not be paid
in full, dismissed, or stayed within 60&nbsp;days;
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) any charges are filed or any other action or proceeding is instituted by
any Governmental Authority against either the Borrower under the Racketeering
Influence and Corrupt Organizations Statute (18 U.S.C. &#167;1961 <U>et seq</U>.), the
result of which could be the forfeiture or transfer of any material Property of the
Borrower subject to a Lien in favor of the Agent and/or the Lenders without (i)
satisfaction or provision for satisfaction of such Lien, or (ii)&nbsp;such forfeiture or
transfer of such Property being expressly made subject to such Lien;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Borrower shall have (i)&nbsp;concealed, removed, or diverted, or permitted
to be concealed, removed, or diverted, any part of its Property, with intent to
hinder, delay, or defraud its creditors or any of them, (ii)&nbsp;made or suffered a
transfer of any of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance, or similar law, (iii)&nbsp;made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly situated have
not been paid, or (iv)&nbsp;shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal proceedings or
distraint which is not vacated within 30&nbsp;days from the date thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) any Security Instrument shall for any reason not, or cease to, create valid
and perfected first-priority Liens against the Collateral purportedly covered
thereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) a Change-in-Control has occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) There occurs under any Swap Agreement an early Termination Date (as defined
in such Swap Agreement) resulting from (i)&nbsp;any event of default under such Swap
Agreement to which the Borrower or any Subsidiary is the Defaulting Party (as
defined in such Swap Agreement), or (ii)&nbsp;any Termination Event (as so defined) under
such Swap Agreement as to which the Borrower or any Subsidiary is an Affected Party
(as so defined) and, in either event, the Swap Termination Value owed by the
Borrower or such Subsidiary as a result thereof constitutes Indebtedness.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Remedies</U>. (a)&nbsp;Upon the occurrence of an Event of Default specified in Sections
7.1(f) or 7.1(g), immediately and without notice, (i)&nbsp;all Obligations shall automatically become
immediately due and payable, without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein, all of which are
hereby expressly waived by the Borrower; (ii)&nbsp;the Commitment shall immediately cease and terminate
unless and until reinstated by the Lenders in writing; and (iii)&nbsp;the Lenders are hereby authorized
at any time and from time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits (general or special, time or
demand, provisional or final) held by the Lenders and any and all other indebtedness at any time
owing by the Lender to or for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Upon the occurrence of any Event of Default other than those specified in Sections&nbsp;7.1(f)
or 7.1(g), (i)&nbsp;the Agent, at the request of Required Lenders shall, by notice to the Borrower,
declare all Obligations immediately due and payable, without presentment, demand, protest, notice
of protest, default, or dishonor, notice of intent to accelerate maturity, notice of acceleration
of maturity, or other notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by the Borrower; (ii)&nbsp;the Commitment shall
immediately cease and terminate unless and until reinstated by the Lenders in writing; and (iii)
the Lenders are hereby authorized at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) held by the Lenders and any and all
other indebtedness at any time owing by the Lenders to or for the credit or account of the Borrower
against any and all of the Obligations although such Obligations may be unmatured.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Upon the occurrence of any Event of Default, the Lenders and the Agent may, in addition to
the foregoing in this Section, exercise any or all of its rights and remedies provided by law or
pursuant to the Loan Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;All proceeds realized from the liquidation or other disposition of any collateral granted
pursuant to any Security Instrument or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <I>first, </I>to payment or reimbursement of that portion of the
Obligations constituting fees, expenses and indemnities payable to
the Agent in its capacity as such;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <I>second, </I>pro rata to payment or reimbursement of that
portion of the Obligations constituting fees, expenses and
indemnities payable to the Lenders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <I>third, </I>pro rata to payment of accrued interest on the
Loans;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <I>fourth, </I>pro rata to payment of principal outstanding on
the Loans and Obligations owed to any Lender or affiliate of any
Lender under any Commodity Hedge Agreement or Rate Management
Transaction;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) <I>fifth, </I>pro rata to any other Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) <I>sixth, </I>to serve as cash collateral to be held by the Agent
to secure the LC Exposure; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) <I>seventh, </I>any excess, after all of the Obligations shall
have been indefeasibly paid in full in cash, shall be paid to the
Borrower or as otherwise required by any Governmental Authority.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VIII</B></u>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><u> <B>THE AGENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Appointment</U>. Each Lender hereby designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Loan Documents. Each Lender authorizes the
Agent, as the agent for such Lender, to take such action on behalf of such Lender under the
provisions of this Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities except those expressly set forth
herein or in any other Loan Document or any fiduciary relationship with any Lender; and no implied
covenants, functions, responsibilities, duties, obligations, or liabilities on the part of the
Agent shall be read into this Agreement or any other Loan Document or otherwise exist against the
Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Amendments and Waivers</U>. Neither this Agreement nor any of the other Loan
Documents nor any terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this Section. The Agent and the Borrower may, with the written
consent of the Required Lenders, from time to time, enter into written amendments, supplements or
modifications to the Loan Documents for the purpose of adding any provisions to this Agreement or
the other Loan Documents or changing in any manner the rights of the Lenders or the Borrower
hereunder or thereunder or waiving, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such amendment, supplement,
modification or waiver shall (a)&nbsp;extend the time of payment of any Note or any installment thereof,
reduce the rate or extend the time of payment of interest thereon, extend the Commitment
Termination Date or Final Maturity, reduce or extend the time of payment of any fee payable to the
Lenders hereunder, reduce the principal amount of the Obligations, release any Collateral in excess
of that allowed by Section&nbsp;6.4, change the Percentage Share of any Lender or the definition of the
Facility Amount or the Borrowing Base, amend, modify or waive any provision of this Section or
Section&nbsp;2.9, or any other provision applicable to the determination of the Borrowing Base or
increasing the Borrowing Base, release any Guarantor, change the percentage specified in the
definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of
its rights or obligations under this Agreement or the other Loan Documents, in any such case
without the written consent of all Lenders, (b)&nbsp;amend, modify or waive any provision of Article&nbsp;8
or the rights or obligations of the Agent without the written consent of the Agent, or (c)&nbsp;amend,
modify or waive any provision of Section&nbsp;2.2 or the rights or obligations of the Agent as the
issuer of Letters of Credit without the written consent of the Agent. Any such amendment,
supplement, modification or waiver shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the Lenders, the Agent, and all future holders of the Notes. In the event of
any waiver, the Borrower, the Lenders, and the Agent shall be restored to their respective former
positions and rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right with respect thereto.
Neither this
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 51 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Delegation of Duties</U>. The Agent may execute any of its duties under this
Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall
not be responsible to any Lender for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Exculpatory Provisions</U>. Neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (a)&nbsp;required to initiate or conduct any
litigation or collection proceedings hereunder, except with the concurrence of the Required Lenders
and contribution by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b)&nbsp;liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any other Loan Document
(except for gross negligence or willful misconduct of the Agent or such Person), or (c)&nbsp;responsible
in any manner to any Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document or for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or records of the
Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Reliance by Agent</U>. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless and
until a written notice of assignment, negotiation, or transfer thereof shall have been received by
the Agent. The Agent shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and contribution by each Lender of its Percentage
Share of costs reasonably expected by the Agent to be incurred in connection therewith. The Agent
shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required Lenders. Such request
and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all
future holders of the Notes. In no event shall the Agent be required to take any action that
exposes the Agent to personal liability or that is contrary to any Loan Document or applicable
Requirement of Law.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 52 -<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6
<U>Notice of Default</U>. The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default unless the Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a &#147;notice of default.&#148; In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably directed by the
Required Lenders; <U>provided</U> that unless and until the Agent shall have received such
directions, subject to the provisions of Section&nbsp;7.2, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders. In the event that the
officer of the Agent primarily responsible for the lending relationship with the Borrower or the
officer of any Lender primarily responsible for the lending relationship with the Borrower becomes
aware that a Default or Event of Default has occurred and is continuing, the Agent or such Lender,
as the case may be, shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, promptly of such occurrence. Notwithstanding the preceding sentence, failure
to comply with the preceding sentence shall not result in any liability to the Agent or any Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7
<U>Non-Reliance on Agent and Other Lenders</U>. Each Lender expressly acknowledges that
neither the Agent nor any other Lender nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representation or warranty to such Lender and
that no act by the Agent or any other Lender hereafter taken, including any review of the affairs
of the Borrower, shall be deemed to constitute any representation or warranty by the Agent or any
Lender to any other Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the business,
operations, property, condition (financial and otherwise) and creditworthiness of the Borrower and
the value of the Collateral and other Properties of the Borrower and has made its own decision to
enter into this Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrower and the value of the
Collateral and other Properties of the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other information concerning
the business, operations, property, condition (financial and otherwise), or creditworthiness of the
Borrower or the value of the Collateral or other Properties of the Borrower which may come into the
possession of the Agent or any of its officers, directors, employees, agents, attomeys-in-fact or
affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8
<U><B>INDEMNIFICATION</B></U><B>.</B> <B> EACH LENDER AGREES TO INDEMNIFY THE AGENT AND ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES (TO THE EXTENT NOT
REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), RATABLY
ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS,</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 53 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE
FOREGOING, INCLUDING ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF
THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES. THE AGREEMENTS IN THIS SECTION SHALL SURVIVE THE PAYMENT AND
PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9
<U>Restitution</U>. Should the right of the Agent or any Lender to realize funds with
respect to the Obligations be challenged and any application of such funds to the Obligations be
reversed, whether by Governmental Authority or otherwise, or should the Borrower otherwise be
entitled to a refund or return of funds distributed to the Lenders in connection with the
Obligations, the Agent or such Lender, as the case may be, shall promptly notify the Lenders of
such fact. Not later than Noon, Central Standard or Central Daylight Savings Time, as the case may
be, of the Business Day following such notice, each Lender shall pay to the Agent an amount equal
to the ratable share of such Lender of the funds required to be returned to the Borrower. The
ratable share of each Lender shall be determined on the basis of the percentage of the payment all
or a portion of which is required to be refunded originally distributed to such Lender, if such
percentage can be determined, or, if such percentage cannot be determined, on the basis of the
Percentage Share of such Lender. The Agent shall forward such funds to the Borrower or to the
Lender required to return such funds. If any such amount due to the Agent is made available by any
Lender after Noon, Central Standard or Central Daylight Savings Time, as the case may be, of the
Business Day following such notice, such Lender shall pay to the Agent (or the Lender required to
return funds to the Borrower, as the case may be) for its own account interest on such amount at a
rate equal to the Federal Funds Rate for the period from and including the date on which
restitution to the Borrower is made by the Agent (or the Lender
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">required to return funds to the Borrower, as the case may be) to but not including the date on
which such Lender failing to timely forward its share of funds required to be returned to the
Borrower shall have made its ratable share of such funds available.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10
<U>Agent in Its Individual Capacity</U>. The Agent and its affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the Borrower as though the
Agent were not the agent hereunder. With respect to any Note issued to the Lender serving as the
Agent, the Agent shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms &#147;Lender&#148; and &#147;Lenders&#148;
shall include the Agent in its individual capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11
<U>Successor Agent</U>. The Agent may resign as Agent upon ten days&#146; notice to the
Lenders and the Borrower. If the Agent shall resign as Agent under this Agreement and the other
Loan Documents, Lenders for which the Percentage Shares aggregate at least fifty-one percent (51%)
shall appoint from among the Lenders a successor agent for the Lenders, subject to the reasonable
consent of the Borrower, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent. In the event the Lenders fail to appoint a successor Agent or the one
appointed does not accept such appointment within 30 calendar days, the resigning Agent shall
appoint a successor Agent. The term &#147;Agent&#148; shall mean such successor agent effective upon its
appointment. The rights, powers, and duties of the former Agent as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of any Agent
hereunder as Agent, the provisions of this Article&nbsp;VIII and those of any Section hereof relating to
the Agent, including Section&nbsp;5.14, Section&nbsp;5.15 and Section&nbsp;5.19 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12
<U>Applicable Parties</U>. The provisions of this Article are solely for the benefit of
the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary
or otherwise under any of the provisions of this Article. In performing functions and duties
hereunder and under the other Loan Documents, the Agent shall act solely as the agent of the
Lenders and does not assume, nor shall it be deemed to have assumed, any obligation or relationship
of trust or agency with or for the Borrower or any legal representative, successor, and assign of
the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.13
<U>Co-Documentation Agents</U>. None of the Co-Documentation Agents listed on the cover
page of this Agreement shall have any powers, duties or responsibilities under this Agreement or
any of the other Loan Documents except in its capacity as a Lender hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IX</B></u>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><u> <B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1
<U>Assignments; Participations</U>. Each Lender may assign or sell
participations in its Loans and Commitments to one or more other Persons in accordance with this
Section&nbsp;9.1.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">(a) <U>Assignments.</U> Any Lender,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) with the written consent of the Borrower (which written
consent of the Borrower shall not be required if an Event of Default
exists) and the Agent (which consent shall not be unreasonably
delayed or withheld), may at any time, assign and delegate to one or
more commercial banks or other financial institutions, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any
of its Affiliates or to any other Lender
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(each Person described in (i)&nbsp;or (ii)&nbsp;above as being the Person to whom such assignment and
delegation is to be made, being hereinafter referred to as an
&#147;<U>Assignee</U> <U>Lender</U>&#148;), all or any
fraction of such Lender&#146;s total Loans and Commitments (which assignment and delegation shall be of
a constant, and not a varying percentage, of all the assigning Lender&#146;s Loans and Commitments), in
a minimum aggregate amount of $5,000,000 of such Lender&#146;s Percentage Share, if less; provided,
however, that such Assignee Lender will comply with all the provisions of this Agreement, and
further, provided, however, that the Borrower and Agent shall be entitled to continue to deal
solely and directly with such assigning Lender in connection with the interests so assigned and
delegated to an Assignee Lender until:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) written notice of such assignment and delegation together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the
Borrower and the Agent by such Lender and such Assignee Lender,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) such Assignee Lender shall have executed and delivered to
the Borrower and the Agent a Lender Assignment Agreement, accepted
by the Borrower and the Agent and attached hereto as Exhibit&nbsp;VI, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the processing fees described below shall have been paid.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From and after the date that the Borrower and the Agent accept such Lender Assignment Agreement,
(a)&nbsp;the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and
to the extent that rights and obligations hereunder have been assigned and delegated to such
Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (b)&nbsp;the Assignor Lender,
to the extent that rights and obligations hereunder have been assigned and delegated by it in
connection with such Lender Assignment Agreement, shall be released from its obligations hereunder
and under the other Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver
to the Agent (for delivery to the relevant Assignee
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 56 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lender) new Notes evidencing such Assignee Lender&#146;s assigned Loans and Commitments and, if the
assignor Lender has retained Loans and Commitments hereunder, replacement Notes in the principal
amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note
shall be dated the date of the predecessor Notes. The assignor Lender shall mark the predecessor
Notes &#147;exchanged&#148; and deliver them to the Borrower. Accrued interest on that part of the
predecessor Notes evidenced by the new Notes, and accrued fees, shall be paid as provided in the
Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes evidenced by
the replacement Notes shall be paid to the assignor Lender. Accrued interest and accrued fees shall
be paid at the same time or times provided in the predecessor Notes and in this Agreement. Such
assignor Lender or such assignee Lender must also pay a processing fee to the Agent upon delivery
of any Lender Assignment Agreement in the amount of $3,000. Any attempted assignment and delegation
not made in accordance with this Section&nbsp;9.1 shall be null and void.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Participations</U>. Any Lender, with the prior written consent of the Borrower in its
sole discretion, may at any time sell to one or more commercial banks (each of such commercial
banks being herein called a &#147;<U>Participant</U>&#148;) participating interests in any of the Loans,
Commitments, or other interests of such Lender hereunder; provided, however, that (a)&nbsp;no
participation contemplated in this Section&nbsp;9.1 shall relieve such Lender from its Commitments or
its other obligations hereunder or under any other Loan Document, (b)&nbsp;such Lender shall remain
solely responsible for the performance of its Commitments and such other obligations, (c)&nbsp;the
Borrower and the Agent shall continue to deal solely and directly with such Lender in connection
with such Lender&#146;s rights and obligations under this Agreement and each of the other Loan
Documents, (d)&nbsp;no Participant shall be entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan Document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2
<U>Survival of Representations, Warranties, and Covenants</U>. All representations and
warranties of the Borrower and all covenants and agreements herein made shall survive the execution
and delivery of the Notes and the Security Instruments and shall remain in force and effect so long
as any Obligation is outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3
<U>Notices and Other Communications</U>. Except as to oral notices expressly
authorized herein, which oral notices shall be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand, or other communication shall be deemed to have
been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited
in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed
as follows:
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">if to the Agent and Lender, to:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty Bank, FSB</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">333 Clay Street, Suite&nbsp;4400</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Houston, Texas 77002</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: Kelly L. Elmore, III</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Telecopy: (713)&nbsp;890-8868</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">if to the Borrower, to:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PrimeEnergy Corporation</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PrimeEnergy Management Corporation</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prime Operating Company</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eastern Oil Well Service Company</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Southwest Oilfield Construction Company</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EOWS Midland Company</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">One Landmark Square</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stamford, Connecticut 06901</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: Ms.&nbsp;Beverly A. Cummings</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Telecopy: (203)&nbsp;358-5786</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any party may, by proper written notice hereunder to the others, change the individuals or
addresses to which such notices to it shall thereafter be sent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4
<U>Parties in Interest</U>. Subject to applicable restrictions contained herein,
all covenants and agreements herein contained by or on behalf of the Borrower, the Agent or the
Lenders shall be binding upon and inure to the benefit of the Borrower, the Agent or the Lenders,
as the case may be, and their respective legal representatives, successors, and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5
<U>Rights of Third Parties</U>. All provisions herein are imposed solely and exclusively
for the benefit of the Agent, Lenders and the Borrower. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing to require
satisfaction of provisions hereof in accordance with their terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Renewals; Extensions</U>. All provisions of this Agreement relating to the Notes
shall apply with equal force and effect to each promissory note hereafter executed which in whole
or in part represents a renewal or extension of any part of the Indebtedness of the Borrower under
this Agreement, the Notes, or any other Loan Document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7
<U>No Waiver; Rights Cumulative</U>. No course of dealing on the part of the Agent or the
Lenders, its officers or employees, nor any failure or delay by the Agent or the Lenders with
respect to exercising any of its rights under any Loan Document shall operate as a waiver thereof.
The rights of the Agent or the Lenders under the Loan Documents shall be cumulative and the
exercise or partial exercise of any such right shall not preclude the exercise of any other right.
Neither the making of any Loan nor the issuance of a Letter of Credit shall constitute a waiver of
any of the covenants, warranties, or conditions of the Borrower contained herein. In the event the
Borrower is unable to satisfy any such covenant, warranty, or condition, neither the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 58 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">making of any Loan nor the issuance of a Letter of Credit shall have the effect of precluding the
Lenders from thereafter declaring such inability to be an Event of Default as hereinabove provided.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8
<U>Survival Upon Unenforceability</U>. In the event any one or more of the provisions
contained in any of the Loan Documents or in any other instrument referred to herein or executed in
connection with the Obligations shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or Unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to herein or executed in
connection with such Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9
<U>Amendments; Waivers</U>. Neither this Agreement nor any provision hereof may be
amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver, discharge, or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10
<U>Controlling Agreement</U>. In the event of a conflict between the provisions of this
Agreement and those of any other Loan Document, the provisions of this Agreement shall control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11
<U>Disposition of Collateral</U>. Notwithstanding any term or provision, express or
implied, in any of the Security Instruments, the realization, liquidation, foreclosure, or any
other disposition on or of any or all of the Collateral shall be in the order and manner and
determined in the sole discretion of the Lenders; provided, however, that in no event shall any
Lender violate applicable law or exercise rights and remedies other than those provided in such
Security Instruments or otherwise existing at law or in equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12
<U><B>GOVERNING LAW</B></U>.<B> THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE CONTRACTS
MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER,
THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.13
<U><B>JURISDICTION AND VENUE</B></U>.<B> ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING
DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN
COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND
HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY
LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 59 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.14
<U><B>WAIVER OF RIGHTS TO JURY TRIAL</B></U>.<B> THE BORROWER, AGENT AND THE LENDERS HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.15
<U><B>ENTIRE AGREEMENT</B></U>.<B> THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR
AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
HEREOF. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG SUCH PARTIES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.16
<U>USA Patriot Act Notice</U>. 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&nbsp;26, 2001)) (the &#147;<U>Act</u>&#148;), 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.17
<U>Confidentiality</U>. Each of the Agent and the Lenders agree to maintain the
confidentiality of the Information (as defined below), except that Information may be disclosed (a)
to its and its Affiliates&#146; directors, officers, employees and agents, including accountants, legal
counsel and other advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed to keep such
Information confidential), (b)&nbsp;to the extent requested by any regulatory authority, (c)&nbsp;to the
extent required by applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement or any other Loan Document, (e)&nbsp;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 or rights
hereunder or thereunder, (f)&nbsp;subject to any agreement containing provisions substantially the same
as those of this Section&nbsp;9.17, to (i)&nbsp;any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this Agreement or (ii)&nbsp;any
actual or prospective counterparty (or its advisors) to any Swap Agreement relating to the Borrower
and its obligations, (g)&nbsp;with the consent of the Borrower or (h)&nbsp;to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section&nbsp;9.17
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 60 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or (ii)&nbsp;becomes available to the Agent or any Lender on a nonconfidential basis from a source other
than the Borrower. For the purposes of this Section&nbsp;9.17, &#147;<u>Information</u>&#148; 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 Agent or any Lender on a
nonconfidential 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&nbsp;9.17 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.18
<U>Counterparts</U>. For the convenience of the parties, this Agreement may be
executed in multiple counterparts, each of which for all purposes shall be deemed to be an
original, and all such counterparts shall together constitute but one and the same Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.19
<U>Security Instruments</U>. Borrower ratifies and affirms each of the Security
Instruments and agrees that each of the Security Instruments continue to secure the Obligations.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><I>&#091;Remainder of Page Intentionally Left Blank&#093;</I></B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 61 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement is deemed executed effective as of the date first
above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>BORROWER:</b></U> <BR>
<BR>

<b>PRIMEENERGY CORPORATION</b><BR>
<b>PRIMEENERGY MANAGEMENT</b><BR>
<b>CORPORATION, PRIME OPERATING</b> <BR>
<b>COMPANY, EASTERN OIL WELL SERVICE</b><BR>
<b>COMPANY, SOUTHWEST OILFIELD</b><BR>
<b>CONSTRUCTION COMPANY</b> <BR>
<b>EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and<br>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 62 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B><u>AGENT</U>:</b><BR>
<BR>

<b>GUARANTY BANK, FSB</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David M. Butler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David M. Butler&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 63 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B><U>LENDER</U>:</b><BR>
<BR>
<b>BNP PARIBAS</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Douglas R. Liftman
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Douglas R. Liftman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Managing Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Polly Schott
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:0px solid #000000" align="left" valign="top">Polly Schott</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:0px solid #000000" align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left">Applicable Lending Office for all Loans:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">Telecopy:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 63 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>LENDER</b></U>:<BR>
<BR>

<b>JPMORGAN CHASE BANK, N.A.</b><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Jo Linda Papadakis</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jo Linda Papadakis&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left">Applicable Lending Office for all Loans:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="bottom" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">Telecopy:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 65 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>PROMISSORY NOTE</U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$45,000,000
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR
VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>GUARANTY BANK,</b> <B>FSB </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas,
the sum of FORTY-FIVE MILLION DOLLARS ($45,000,000.00), or so much thereof as may be advanced
against this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker
and Payee (as amended, restated, or supplemented from time to time, the &#147;<U>Credit
Agreement</U>&#148;), together with interest at the rates and calculated as provided in the Credit
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><I>(Page One of Two Page Note)</I>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">I-i

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT <BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE <BR>
COMPANY, SOUTHWEST OILFIELD <BR>
CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and<BR>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">I-ii

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>PROMISSORY NOTE</U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$52,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>BNP PARIBAS,</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas, 1200 Smith
Street, Suite&nbsp;3100, Houston, Texas 77002, the sum of FIFTY-TWO MILLION FIVE HUNDRED THOUSAND
DOLLARS ($52,500,000.00), or so much thereof as may be advanced against this Note pursuant to the
Credit Agreement dated of even date herewith by and between Maker and Payee (as amended, restated,
or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with interest at the rates
and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the Credit
Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker may at
any time pay the full amount or any part of this Note without the payment of any premium or fee,
but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as it
becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF
THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->I&#150;iii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->I&#150;iv<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>PROMISSORY NOTE</B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$52,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>JPMORGAN CHASE BANK, N. A.,</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas,
712 Main Street, 8<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, Houston, Texas 77002, the sum of FIFTY-TWO MILLION FIVE
HUNDRED THOUSAND DOLLARS ($52,500,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->I&#150;v<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD <BR>
CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->I&#150;vi<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I(A)</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF REVOLVING LINE OF CREDIT NUMBER 2 NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$3,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>GUARANTY BANK, FSB </B>(&#147;<u>Payee</u>&#148;), at its banking quarters in Houston, Harris County, Texas, the sum
of THREE MILLION DOLLARS ($3,000,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the &#147;<u>Credit Agreement</u>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>(Page One of Two Page Note)</I></B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;i<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE <BR>
COMPANY, SOUTHWEST OILFIELD <BR>
CONSTRUCTION COMPANY <BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;ii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I(A)</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF REVOLVING LINE OF CREDIT NUMBER 2 NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$3,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>BNP PARIBAS, </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas, 1200 Smith
Street, Suite&nbsp;3100, Houston, Texas 77002, the sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS,
($3,500,000.00), or so much thereof as may be advanced against this Note pursuant to the Credit
Agreement dated of even date herewith by and between Maker and Payee (as amended, restated, or
supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with interest at the rates and
calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>(Page One of Two Page Note)</I></B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;iii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT <BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;iv<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I(A)</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF REVOLVING LINE OF CREDIT NUMBER 2 NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">$3,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>JPMORGAN CHASE BANK, N.A.,</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas,
712 Main Street, 8<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, Houston, Texas 77002, the sum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000.00), or so much thereof as may be advanced against this Note pursuant
to the Credit Agreement dated of even date herewith by and between Maker and Payee (as amended,
restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with interest at the
rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>(Page One of Two Page Note)</I></B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;v<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT <BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL
SERVICE <BR>COMPANY, SOUTHWEST
OILFIELD <BR>CONSTRUCTION
COMPANY <BR>EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->I(A)&#150;vi<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT II</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF BORROWING REQUEST&#093;</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GUARANTY BANK, FSB<BR>
333 CLAY STREET, SUITE 4400<BR>
HOUSTON, TEXAS 77002<BR>
Attention: Kelly L. Elmore, II

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Credit Agreement dated as of December&nbsp;28, 2006, by and between
PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST OILFIELD CONSTRUCTION
COMPANY, EOWS MIDLAND COMPANY and GUARANTY BANK, FSB, as Agent, and the Lenders
signatory thereto from time to time (as amended, restated, or supplemented from
time to time, the &#147;<U>Credit Agreement</U>&#148;)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Ladies and Gentlemen:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Credit Agreement, the Borrower hereby makes the requests indicated below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Loans</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount of new Loan: $</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Requested funding date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 20</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of such Loan is to be a Floating Rate Loan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of such Loan is to be a LIBO Rate Loan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Requested Interest Period for LIBO Rate Loan: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> months.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Continuation or conversion of LIBO Rate Loan maturing on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; :</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be continued as a LIBO Rate Loan is $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, with an
Interest Period of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; months;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be converted to a Floating Rate Loan is $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Conversion of Floating Rate Loan:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Requested conversion date: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 20 .</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be converted to a LIBO Rate Loan is $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , with an
Interest Period of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> months.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->II&#150;i<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The undersigned certifies that she/he is the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of the Borrower, has obtained all
consents necessary, and as such she/he is authorized to execute this request 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, continuation, or conversion under
the terms and conditions of the Credit Agreement and are in full compliance with all the terms and
conditions of the Credit Agreement. Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>BORROWER:</B></U> <BR>
<BR>
<B>PRIMEENERGY CORPORATION <BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY <BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II&#150;ii<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT III </B></U><BR>
<B>&#091;FORM OF COMPLIANCE CERTIFICATE&#093;</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> <B>, 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GUARANTY BANK, FSB<BR>
333 CLAY STREET, SUITE 4400<BR>
HOUSTON, TEXAS 77002<BR>
Attention: Kelly L. Elmore, III

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Credit Agreement dated as of December&nbsp;28, 2006, by and between
PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME OPERATING
COMPANY, EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST OILFIELD CONSTRUCTION
COMPANY, EOWS MIDLAND COMPANY and GUARANTY BANK, FSB, as Agent, and the Lenders
signatory thereto from time to time (as amended, restated, or supplemented from
time to time, the &#147;<U>Credit Agreement</U>&#148;)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to applicable requirements of the Credit Agreement, the undersigned, as a Responsible
Officer of the Borrower, hereby certifies to you the following information as true and correct as
of the date hereof or for the period indicated, as the case may be:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">1. To the best of the knowledge of the undersigned, no Default or Event of Default exists as
of the date hereof or has occurred since the date of our previous certification to you, if
any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">1. To the best of the knowledge of the undersigned, the following Defaults or Events
of Default exist as of the date hereof or have occurred since the date of our previous
certification to you, if any, and the actions set forth below are being taken to remedy such
circumstances:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">2. The compliance of the Borrower with the financial covenants of the Credit
Agreement, as of the close of business on <U>&nbsp;&nbsp;&nbsp;&nbsp;</U> , is evidenced by the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.13: <U>Interest Coverage Ratio.</U>
Permit, as of the close of any fiscal quarter, the ratio of (a)
quarterly EBITDAX on a trailing four-quarter basis to (b)
Interest Expense to be less than 3.00 to 1.00, measured on a
trailing four-quarter basis.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>Actual</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to 1.0

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->III&#150;i<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.14: <U>Current Ratio.</U> Permit, as of the close
of any
fiscal quarter, the ratio of Current Assets to Current
Liabilities to be less than 1.00 to 1.00.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>Actual</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to 1.0

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.15: <U>Tangible Net Worth.</U> Permit Tangible
Net
Worth, as of the close of any fiscal quarter, to be less than
$40,000,000 at September&nbsp;30, 2006, plus 75% of positive
quarterly net income thereafter.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>Actual</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">&nbsp;

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.16: <U>Bank Debt Coverage Ratio.</U> Permit, as
of the
close of any fiscal quarter, the ratio of (a)&nbsp;Bank Debt to (b)
EBITDAX to be greater than 4.00 to 1.00, measured on a
trailing four-quarter basis.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>Actual</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to 1.0

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> .
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->III&#150;ii<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each capitalized term used but not defined herein shall have the meaning assigned to such term
in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 47%">Very truly yours,

</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT <BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and
<br>Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->III&#150;iii<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="CENTER" style="font-size: 10pt; margin-top: 6pt"><U><B>EXHIBIT IV</B></U>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>FACILITY AMOUNTS</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Revolving Line of Credit</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Facility</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name of Lender</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Share</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guaranty Bank, FSB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">30.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BNP Paribas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JPMorgan Chase Bank, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">150,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0000000</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Revolving Line of Credit No.&nbsp;2 Loan</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Facility</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Percentage</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name of Lender</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Share</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guaranty Bank, FSB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">30.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BNP Paribas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">JPMorgan Chase Bank, N.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,500,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.00000</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0000000</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->IV&#150;i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>EXHIBIT V</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DISCLOSURES</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U><I>&#091;PLEASE ADVISE IF ANY CHANGES&#093;</I></U></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;1.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>Permitted Liens</u></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liens in favor the &#147;Jackson Group&#148; composed of
Jeral W. Jackson, Inc., Pangaea Properties, Inc. and
William H. Nichols by PrimeEnergy Corporation, Sterling
Asset and Income Funds A-l, A-2, AA-1 and AA-2 (now
PrimeEnergy Asset and Income Funds A-l, A-2, AA-1 and
AA-2) to secure the payment to the Jackson Group of the
&#147;JPN Fee&#148;, being an amount of certain of the proceeds
and accounts arising from the sale of oil and gas from
certain properties located in Garvin County, Oklahoma,
as determined pursuant to the terms of that certain
Memorandum of Agreement dated October&nbsp;1, 1990, and as
evidenced by Financing Statement filed January&nbsp;23, 1991,
Volume 1295, Page 58, Garvin County, Oklahoma, and
Financing Statement filed January&nbsp;28, 1991, N-00844,
Central Filing Office, Oklahoma County Clerk.</TD>
</TR>
<TR><TD>&nbsp;&nbsp;&nbsp;</TR></TD>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.7
</DIV></TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top"><u>Liabilities</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u> Litigation </u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u> Environmental Matters</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>Refunds</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>Gas Contracts</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u> Casualties</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;4.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>Subsidiaries</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None except those listed as Borrowers</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->V-i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>EXHIBIT VI</B></U><BR>
<BR>
<B>&#091;FORM OF ASSIGNMENT AGREEMENT&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ASSIGNMENT AGREEMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This ASSIGNMENT AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time, this &#147;<U>Agreement</U>&#148;) is dated as of  <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>,  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>, by and
between
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
(the &#147;<U>Assignor</U>&#148;) and  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
(the &#147;<U>Assignee</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>RECITALS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Assignor is a party to the Credit Agreement dated as of December&nbsp;28, 2006
(as amended, supplemented or restated from time to time, the <U>&#147;Credit Agreement&#148;</U>), by and
among PRIMEENERGY CORPORATION, PRIMEENERGY MANAGEMENT CORPORATION, PRIME OPERATING COMPANY,
EASTERN OIL WELL SERVICE COMPANY, SOUTHWEST OILFIELD CONSTRUCTION COMPANY, EOWS MIDLAND COMPANY
(collectively, the &#147;<U>Borrower&#148;</U>), each of the lenders that is or becomes a party thereto as provided
in Section&nbsp;9.1(b) of the Credit Agreement (individually, together with its successors and assigns,
a &#147;<U>Lender&#148;</U>, and collectively, together with their successors and assigns, the &#147;<U>Lenders&#148;</U>), and
Guaranty Bank, FSB, a federal savings bank, as a Lender (in such capacity, &#147;Guaranty&#148;) and as
agent for the Lenders (in such capacity, together with its successors in such capacity, the
&#147;<U>Agent&#148;</U>); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee
proposes to purchase and assume from the Assignor, <B>&#091;all&#093; &#091;a portion&#093; </B>of the Assignor&#146;s Facility
Amount and its outstanding Loans, all on the terms and conditions of this Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE I </B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Definitions from Credit Agreement</U>. All capitalized terms used but not
defined herein have the respective meanings given to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Additional Defined Terms</U>. As used herein, the following terms have the
following respective meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&#147;Assigned Interest&#148;</U> shall mean all of Assignor&#146;s (in its capacity as a
&#147;Lender&#148;) rights and obligations (i)&nbsp;under the Credit Agreement and the other Loan
Documents in respect of <B>&#091;all of&#093; &#091;the portion of the&#093; </B>Facility Amount of the
Assignor in the principal amount equal to $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and (ii)&nbsp;to make
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-i<!-- /Folio -->
</DIV>

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\
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Loans under its Commitment up to such amount referenced above and any right to receive
payments for the Loans currently outstanding under its Commitment in the principal
amount of $&#95;&#95;&#95;&#95;  (the &#147;<U>Loan Balance</U>&#148;), plus the interest and fees which will accrue with
respect thereto from and after the Assignment Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&#147;Assignment Date&#148;</U> shall mean &#95;&#95;&#95;&#95;,&#95;&#95;&#95;&#95;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>References</U>. References in this Agreement to Schedule, Exhibit, Article, or
Section numbers shall be to Schedules, Exhibits, Articles, or Sections of this Agreement, unless
expressly stated to the contrary. References in this Agreement to &#147;hereby,&#148; &#147;herein,&#148;
&#147;hereinafter,&#148; &#147;hereinabove,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and words of similar import
shall be to this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. Except as otherwise indicated, references in
this Agreement to statutes, sections, or regulations are to be construed as including all statutory
or regulatory provisions consolidating, amending, replacing, succeeding, or supplementing the
statute, section, or regulation referred to. References in this Agreement to &#147;writing&#148; include
printing, typing, lithography, facsimile reproduction, and other means of reproducing words in a
tangible visible form. References in this Agreement to agreements and other contractual
instruments shall be deemed to include all exhibits and appendices attached thereto and all
subsequent amendments and other modifications to such instruments, but only to the extent such
amendments and other modifications are not prohibited by the terms of this Agreement. References in
this Agreement to Persons include their respective successors and permitted assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall be
construed as cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Negotiated Transaction</U>. Each party to this Agreement affirms to the other that it
has had the opportunity to consult, and discuss the provisions of this Agreement with, independent
counsel and fully understands the legal effect of each provision.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->VII-ii<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE II </B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>SALE AND ASSIGNMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Sale and Assignment</U>. On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns and transfers to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the right, title
and interest of the Assignor in and to, and all of the obligations of the Assignor in respect of,
the Assigned Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Assumption of Obligations</U>. The Assignee agrees with the Assignor (for the
express benefit of the Assignor and the Borrower) that the Assignee will, from and after the
Assignment Date, assume and perform all of the obligations of the Assignor in respect of the
Assigned Interest. From and after the Assignment Date: (a)&nbsp;the Assignor shall be released from the
Assignor&#146;s obligations in respect of the Assigned Interest, and (b)&nbsp;the Assignee shall be entitled
to all of the Assignor&#146;s rights, powers and privileges under the Credit Agreement and the other
Loan Documents in respect of the Assigned Interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Consent by Agent</U>. By executing this Agreement as provided
below, in accordance with Section&nbsp;9.1(b) of the Credit Agreement, the Agent hereby acknowledges
notice of the transactions contemplated by this Agreement and consents to such transactions.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE III </B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>PAYMENTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Payments</U>. As consideration for the sale, assignment and transfer contemplated by
Section&nbsp;2.1, the Assignee shall, on the Assignment Date, assume Assignor&#146;s obligations in respect
of the Assigned Interest and pay to the Assignor an amount equal to the Loan Balance, if any, all
accrued and unpaid interest and fees with respect to the Assigned Interest as of the Assignment
Date. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Allocation of Payments</U>. The Assignor and the Assignee agree
that (i)&nbsp;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)&nbsp;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)&nbsp;the Agent is authorized and instructed to allocate
payments received by it for the 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.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-iii<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Delivery of Notes</U>. Promptly following the receipt by the Assignor of the
consideration required to be paid under Section&nbsp;3.1 hereof, the Assignor shall, in the manner
contemplated by Section&nbsp;9.1(b) of the Credit Agreement, (i)&nbsp;deliver to the Agent (or its counsel)
the Note held by the Assignor and (ii)&nbsp;notify the Agent to request that the Borrower execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the Assignee, dated
the Assignment Date in respective principal amounts equal to the respective Facility Amounts of the
Assignor (if appropriate) and the Assignee after giving effect to the sale, assignment and transfer
contemplated hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Further Assurances</U>. The Assignor and the Assignee hereby agree to execute and
deliver such other instruments, and take such other actions, as either party may reasonably request
in connection with the transactions contemplated by this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IV </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>CONDITIONS PRECEDENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness of the sale, assignment and transfer contemplated hereby is subject
to the satisfaction of each of the following conditions precedent:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The execution and delivery of this Agreement by the Assignor and the Assignee;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The receipt by the Assignor of the payments required to be made under Section
3.1; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The acknowledgment and consent by the Agent contemplated by Section&nbsp;2.3.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE V </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Representations and Warranties of Assignor</U>. The Assignor
represents and warrants to the Assignee as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) it has all requisite power and authority, and has taken all action necessary
to execute and deliver this Agreement and to fulfill its obligations under, and
consummate the transactions contemplated by, this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the execution, delivery and compliance with the terms hereof by the Assignor
and the delivery of all instruments required to be delivered by it hereunder do not and
will not violate any Requirement of Law applicable to it;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) this Agreement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignor, enforceable against it in
accordance with its terms;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-iv<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its obligations
under this Agreement have been obtained;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Assignor has good title to, and is the sole legal and beneficial owner of,
the Assigned Interest, free and clear of all Liens, claims, participations or other
charges of any nature whatsoever; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the transactions contemplated by this Agreement are commercial banking
transactions entered into in the ordinary course of the banking business of the
Assignor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Disclaimer</U>. Except as expressly provided in Section&nbsp;5.1 hereof, 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 Credit Agreement or in any other Loan Document or for the value, validity, effectiveness,
genuineness, execution, legality, enforceability or sufficiency of the Credit Agreement, the Notes
or any other Loan Document or for any failure by the Borrower or any other Person (other than
Assignor) 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
other Person, or any other matter relating to the Credit Agreement or any other Loan Document or
any extension of credit thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Representations and Warranties of Assignee</U>. The Assignee represents and
warrants to the Assignor as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) it has all requisite power and authority, and has taken all action necessary
to execute and deliver this Agreement and to fulfill its obligations under, and
consummate the transactions contemplated by, this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the execution, delivery and compliance with the terms hereof by the Assignee
and the delivery of all instruments required to be delivered by it hereunder do not and
will not violate any Requirement of Law applicable to it;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) this Agreement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of the Assignee, enforceable against it in
accordance with its terms;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all approvals and authorizations of, all filings with and all actions by any
Governmental Authority necessary for the validity or enforceability of its obligations
under this Agreement have been obtained;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Assignee has received copies of the Credit Agreement and the other Loan
Documents, as well as copies of all Financial Statements previously provided by the
Borrower in satisfaction of obligations under the Credit Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-v<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the Assignee has fully reviewed the terms of the Credit Agreement and the
other Loan Documents and has independently and without reliance upon the Assignor, and
based on such information as the Assignee has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) if the Assignee is not incorporated under the laws of the United Sates of
America or a state thereof, the Assignee has contemporaneously herewith delivered to
the Agent and the Borrower such documents as are required by Section&nbsp;2.25(b) of the
Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the transactions contemplated by this Agreement are commercial banking
transactions entered into in the ordinary course of the banking business of the
Assignee.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VI</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Notices</U>. All notices and other communications provided for herein
(including any modifications of, or waivers, requests or consents under, this Agreement) shall be
given or made in writing (including by telecopy) to the intended recipient at its &#147;Address for
Notices&#148; specified below its name on the signature pages hereof or, as to either party, at such
other address as shall be designated by such party in a notice to the other party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Amendment, Modification or Waiver</U>. No provision of this Agreement may be
amended, modified or waived except by an instrument in writing signed by the Assignor and the
Assignee, and consented to by the Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Successors and Assigns</U>. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted assigns. The
representations and warranties made herein by the Assignee are also made for the benefit of the
Agent, and the Assignee agrees that the Agent is entitled to rely upon such representations and
warranties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Assignments</U>. Neither party hereto may assign any of its rights or obligations
hereunder except in accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts, each
of which shall be identical and all of which, taken together, shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing any such
counterpart.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Governing Law</U>. This Agreement (including the validity and enforceability
hereof) shall be governed by, and construed in accordance with, the laws of the State of Texas,
other than the conflict of laws rules thereof.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-vi<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Expenses</U>. To the extent not paid by the Borrower pursuant to the terms of the
Credit Agreement, each party hereto shall bear its own expenses in connection with the execution,
delivery and performance of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Waiver of Jury Trial</U>. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, any and all right to trial by jury in any legal proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;SIGNATURES APPEAR ON THE FOLLOWING PAGE&#093;</B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->VII-vii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be
executed and delivered as of the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><DIV style="border-bottom: 1px solid #000000; width=0"><B>ASSIGNOR</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="Font-size: 1pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U>Address for Notices:</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Telecopier No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Telephone No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><DIV style="border-bottom: 1px solid #000000; width=0"><B>ASSIGNEE </B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U>Address for Notices: </U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Telecopier No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Telephone No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">ACKNOWLEDGED AND CONSENTED TO:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">GUARANTY BANK, FSB<br>
as Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size:1px">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->VII-viii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>PROMISSORY NOTE </U>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<tr><td>&nbsp;&nbsp;&nbsp;&nbsp;</tr></td>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$45,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>GUARANTY BANK, FSB </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas, the sum
of FORTY-FIVE MILLION DOLLARS ($45,000,000.00), or so much thereof as may be advanced against this
Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee
(as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as
it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT
CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING<BR>
COMPANY, EASTERN OIL WELL SERVICE<BR>
COMPANY, SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY <BR>
EOWS MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<br>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">$3,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the
order of <B>GUARANTY BANK, FSB </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas,
the sum of THREE MILLION DOLLARS ($3,000,000.00), or so much thereof as may be advanced against
this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and
Payee (as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together
with interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME</B><BR><B>OPERATING
COMPANY, EASTERN<BR> OIL WELL SERVICE
COMPANY, </B><BR><B>SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR> EOWS
MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PROMISSORY NOTE</B></U>
</DIV>
<DIV align="center" style="font-size: 1pt; margin-top: 6pt">&nbsp;</div>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">$52,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the
order of <B>JPMORGAN CHASE BANK, N.A.,</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County,
Texas, 712 Main Street, 8<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, Houston, Texas 77002, the sum of FIFTY-TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS ($52,500,000.00), or so much thereof as may be advanced against this
Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee
(as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME</B><BR><B>OPERATING
COMPANY, EASTERN<BR> OIL WELL SERVICE
COMPANY, </B><BR><B>SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR> EOWS
MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<DIV align="center" style="font-size: 1pt; margin-top: 6pt">&nbsp;</div>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">$3,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the
order of <B>JPMORGAN CHASE BANK, N.A.,</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County,
Texas, 712 Main Street, 8<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, Houston, Texas 77002, the sum of THREE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($3,500,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME</B><BR><B>OPERATING
COMPANY, EASTERN<BR> OIL WELL SERVICE
COMPANY, </B><BR><B>SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR> EOWS
MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>PROMISSORY NOTE </U>

</DIV>
<DIV align="center" style="font-size: 1pt; margin-top: 6pt">&nbsp;</div>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">$52,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the
order of <B>BNP PARIBAS, </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County,
Texas, 1200 Smith Street, Suite&nbsp;3100, Houston, Texas 77002, the sum of FIFTY-TWO MILLION FIVE
HUNDRED THOUSAND DOLLARS ($52,500,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME</B><BR><B>OPERATING
COMPANY, EASTERN<BR> OIL WELL SERVICE
COMPANY, </B><BR><B>SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR> EOWS
MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REVOLVING LINE OF CREDIT NUMBER 2 NOTE</B></U>

</DIV>
<DIV align="center" style="font-size: 1pt; margin-top: 6pt">&nbsp;</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">$3,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Houston, Texas
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">December&nbsp;28, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<u>Maker</u>&#148;) promises to pay to
the order of <B>BNP PARIBAS, </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County,
Texas, 1200 Smith Street, Suite&nbsp;3100, Houston, Texas 77002, the sum of THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS, ($3,500,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as
amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, certain events which will entitle the holder hereof to accelerate the maturity
of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to, is the &#147;Note&#148; under, and is payable as provided in the
Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker
may at any time pay the full amount or any part of this Note without the payment of any premium or
fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment
as it becomes due of any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF
THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>(Page One of Two Page Note)</I>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" nowrap><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME</B><BR><B>OPERATING
COMPANY, EASTERN<BR> OIL WELL SERVICE
COMPANY, </B><BR><B>SOUTHWEST OILFIELD<BR>
CONSTRUCTION COMPANY<BR> EOWS
MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Beverly A. Cummings<BR>
Executive Vice President, Treasurer, and<BR>
Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22.5.1
<SEQUENCE>4
<FILENAME>d44173exv10w22w5w1.htm
<DESCRIPTION>LETTER REGARDING AMENDED AND RESTATED CREDIT AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w22w5w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.22.5.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">December&nbsp;28, 2006
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">BNP Paribas<BR>
1200 Smith Street, Suite&nbsp;3100<BR>
Houston, Texas 77002

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Attention: Douglas R. Liftman
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Re:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Credit Agreement dated December&nbsp;28, 2006 by and
among PrimeEnergy Corporation (&#147;<U>PEC</U>&#148;) et al as
&#147;<U>Borrower</U>&#148;, Guaranty Bank, FSB,
as Agent and the Lenders signatory thereto (&#147;<U>Agreement</U>&#148;)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gentlemen:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Guaranty Bank FSB (&#147;<U>Guaranty</U>&#148;) and Prime Offshore L.L.C. (&#147;<U>Offshore</U>&#148;) entered into a Credit
Agreement dated June&nbsp;29, 2006 (&#147;<U>Offshore Credit Agreement</U>&#148;) and as part of the Offshore Credit
Agreement, Guaranty, Offshore and PEC entered into a Completion and Liquidity Maintenance Agreement
(&#147;<U>CLMA</U>&#148;) of even date therewith, whereby PEC agreed to maintain liquidity consisting of unused
revolver availability under the Agreement and/or unrestricted cash and cash equivalents of
$25,000,000. This required level of liquidity will reduce, dollar-for-dollar, with any additional
shareholder advances by PEC to Offshore and increase, dollar-for-dollar, to a maximum of
$25,000,000 with any repayment of shareholder advances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.2(e) of the Agreement reads as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;6.2 <U>Contingent Obligations.</U> Create, incur, assume, or suffer to
exist any Contingent Obligation; provided, however, the foregoing restriction shall not
apply to-----(e)&nbsp;shareholder loans to Prime Offshore L.L.C., provided, however, that Borrower must maintain the greater of 10% of the sum of the Borrowing
Base and the Revolving Line of Credit Number 2 Available Commitment of $10,000,000
subsequent to any such shareholder loan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Guaranty, Offshore and PEC hereby agree that the provisions of Section&nbsp;6.2(e) control as
regards the CLMA and is superior to the terms and provisions of the CLMA, and that PEC cannot make
shareholder loans to Offshore unless the provisions of 6.2(e) are met.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">BNP Paribas<BR>
December&nbsp;28, 2006<BR>
Page 2

</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours,<BR>
<BR>
<B>GUARANTY BANK, FSB</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David M. Butler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David M. Butler &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">

/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIME OFFSHORE L.L.C.</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">

/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
</div>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.2
<SEQUENCE>5
<FILENAME>d44173exv10w23w2.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.23.2
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT CORPORATION<BR>
PRIME OPERATING COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY<BR>
SOUTHWEST OILFIELD CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(DEBTOR)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, AS

AGENT <BR>(SECURED PARTY)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

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<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE I DEFINITIONS AND INTERPRETATION </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:30px; text-indent:-15px">1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Terms Defined Above </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Terms Defined in Credit Agreement </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional Defined Terms </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Undefined Financial Accounting Terms </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; References </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Articles and Sections </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Number and Gender </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE II GRANT OF SECURITY INTEREST </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE III REPRESENTATIONS AND WARRANTIES </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Validity, Perfection and Priority </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No Liens; Other Financing Statements </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Location of Debtor and Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tradenames; Prior Names </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IV COVENANTS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Further Assurances </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change of Chief Executive Office </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change of Name or Corporate Structure </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maintain Records and Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Right of Inspection </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Possession of Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financing Statement Filings; Notifications </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE V ACCOUNTS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Debtor Remains Liable under Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collections on Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VI POWER OF ATTORNEY </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Appointment as Attorney-in-Fact </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No Duty on the Part of Secured Party </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VII REMEDIES; RIGHTS UPON DEFAULT </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rights and Remedies Generally </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collection of Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disposition of Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Debtor&#146;s Accounts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Possession of Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
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<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
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    <TD><DIV style="margin-left:30px; text-indent:-15px">7.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disposition of the Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recourse </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Expenses; Attorneys&#146; Fees </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Application of Proceeds </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Limitation on Duties Regarding Preservation of Collateral </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Waiver of Claims </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Discontinuance of Proceedings </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VIII INDEMNITY </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INDEMNITY </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Indemnity Obligations Secured by Collateral; Survival </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="LEFT" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IX MISCELLANEOUS </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No Waiver; Remedies Cumulative </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Termination; Release </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Counterparts </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marshalling </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Severability </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financing Statement Filing </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notices and Other Communications </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Parties in Interest </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amendments </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ENTIRE AGREEMENT </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:30px; text-indent:-15px">9.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; GOVERNING LAW </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; JURISDICTION AND VENUE </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>AMENDED AND RESTATED</B></U><BR>
<U><B>SECURITY AGREEMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
<B>AMENDED AND RESTATED SECURITY AGREEMENT </B>(this &#147;<U>Agreement</U>&#148;), dated as of
December&nbsp;28, 2006, is by and between <B>PRIMEENERGY CORPORATION, </B>a Delaware corporation
(&#147;<U>PEC</U>&#148;), <B>PRIMEENERGY MANAGEMENT CORPORATION, </B>a New York corporation, <B>PRIME OPERATING
COMPANY, </B>a Texas corporation, <B>EASTERN OIL WELL SERVICE COMPANY, </B>a West Virginia
corporation, <B>SOUTHWEST OILFIELD CONSTRUCTION COMPANY, </B>an Oklahoma corporation, and <B>EOWS
MIDLAND COMPANY, </B>a Texas corporation (collectively, the &#147;:<u>Debtor</U>&#148;), and <B>GUARANTY
BANK, FSB, </B>a federal savings bank, as Agent for the benefit of the Lenders (&#147;<U>Secured
Party</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>W I T
N E S S E T H:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December&nbsp;28, 2006, by and among Debtor, et al., and the Secured Party
and the Lenders signatory thereto (as amended, restated, or supplemented from time to
time, the &#147;<U>Credit Agreement</U>&#148;), the Secured Party and the Lenders have agreed to
extend credit to or for the benefit of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Debtor and the Secured Party entered into a Security Agreement dated
as of December&nbsp;19, 2002, and the parties hereto desire to amend and restate such
Security Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party
and the Lenders to extend credit to or for the benefit of the Debtor pursuant to the
Credit Agreement, Debtor has agreed to execute this Agreement in favor of the Secured
Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE I </B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above</U>. As used herein, each of the terms
&#147;<U>Agreement,</U>&#148; &#147;<U>Credit Agreement</U>,&#148;
&#147;<U>Debtor,</U>&#148; and &#147;<U>Secured
Party</U>&#148; shall have the meaning assigned to such term hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used herein, each of the following terms
shall have the following meanings:
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Accounts</U>&#148; shall mean all accounts receivable, book
debts, notes, drafts, instruments, documents, acceptances, and other forms of
obligations now owned or hereafter received or acquired by or belonging or owing
to Debtor (including, without limitation, under any trade names, styles, or
divisions thereto), whether arising from the sale or lease of goods or the
rendition of services or any other transaction (including, without limitation,
any such obligation which might be characterized as an account, general
intangible, other than contract rights under contracts containing prohibitions
against assignment of or the granting of a security interest in the rights of a
party thereunder, or chattel paper under the Uniform Commercial Code in effect in
any jurisdiction), and all rights of Debtor in, to, and under all purchase orders
now owned or hereafter received or acquired by it for goods or services, and all
rights of Debtor to any goods the sale or lease of which gave rise to any of the
foregoing (including, without limitation, returned or repossessed goods and
rights of unpaid sellers), and all moneys due or to become due to Debtor under
all contracts for the sale or lease of goods or the performance of services
(whether or not earned by performance) or in connection with any other
transaction, now in existence or hereafter arising, including, without
limitation, all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; shall mean each Person obligated on an Account,
Chattel Paper, or General Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Records</U>&#148; shall mean (a)&nbsp;all original copies of all
documents, instruments, or other writings evidencing the Accounts, (b)&nbsp;all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to the Accounts, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems, and other papers and documents relating to the Accounts,
whether in the possession or under the control of Debtor or any computer bureau
or agent from time to time acting for or on behalf of Debtor or otherwise, (c)
all evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements, or other
modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgements, or other writings, including, without
limitation, lien search reports, from filing or other registration offices, (d)
all credit information, reports, and memoranda relating thereto, and (e)&nbsp;all
other written or non-written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Chattel Paper</U>&#148; shall mean all chattel paper (as such term is
defined in Section&nbsp;9-105(a)(2) of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commodity Hedge Agreement</U>&#148; shall mean any agreement, device or
arrangement entered into by one Person with another Person providing for
payments which are related to fluctuations in the price of petroleum (or any
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">fraction thereof), natural gas, or natural gas liquids (including, but
not limited to, swaps, caps, collars, options, puts, calls, futures and
forward contracts).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General Intangibles</U>&#148; shall mean all general intangibles (as
such term is defined in Section&nbsp;9-106 of the UCC) of Debtor, including,
without limitation, rights to the payment of money (other than Accounts),
net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment
or grant of a security interest by Debtor), federal income tax refunds,
trade names, distributions on certificated securities (as defined in
&#167;8-102(a)(l) of the UCC) and uncertificated securities (as defined in
&#167;8-102(a)(2) of the UCC), computer programs and other computer software,
inventions, designs, trade secrets, goodwill, proprietary rights, customer
lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests
in pension and profit-sharing plans and reversionary, beneficial and
residual interests in trusts, credits with and other claims against any
Person, together with any collateral for any of the foregoing and the
rights under any security agreement granting a security interest in such
collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnitees</U>&#148; shall mean the Secured Party and its
shareholders, officers, directors, employees, agents, attorneys-in-fact,
and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeds</U>&#148; shall mean proceeds (as such term is defined in
Section&nbsp;9-306(a)of the UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rate Management Transaction</U>&#148; shall mean any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between Borrower and Lenders which is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to on or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</U>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>UCC</U>&#148; shall mean the Uniform Commercial Code as in effect from
time to time in the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial
accounting terms used in this Agreement shall have the meanings assigned to such terms
according to GAAP.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148;
&#147;hereinafter,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular
Article, Section, or provision of this Agreement. References in this Agreement to
Articles, Sections, or Exhibits are to such Articles, Sections, or Exhibits of this
Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Articles and Sections</U>. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and other legal
relations of the parties hereto shall be determined from this instrument as an entirety
and without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to such Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Number and Gender</U>. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise, the plural
shall be understood to include the singular. Words denoting sex shall be construed to
include the masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as cumulative.
Definitions of terms defined in the singular or plural shall be equally applicable to
the plural or singular, as the case may be, unless otherwise indicated.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE II</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><u><B>GRANT OF SECURITY INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all
Secured Obligations, Debtor hereby assigns and transfers for the purpose of security and
pledges to the Secured Party and grants to the Secured Party a security interest in and
continuing lien on all right, title, and interest of Debtor in, to, and under the
following, in each case, whether now owned or existing or hereafter acquired or arising,
and wherever located (all of which is herein collectively called the
&#147;<U>Collateral</U>&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all General Intangibles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Commodity Hedge Agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Rate Management Transactions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing,
and all Proceeds and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE III</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U> <B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations
and warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Validity, Perfection and Priority</U>. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and continuing
security interests in the Collateral. Upon the filing of financing statements, naming
Debtor as &#147;debtor&#148; and the Secured Party as &#147;secured party&#148; and describing the
Collateral, in the filing offices set forth on Exhibit&nbsp;A, the security interests granted
to the Secured Party hereunder will constitute valid first-priority perfected security
interests in all Collateral with respect to which a security interest can be perfected by
the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted
to the Secured Party hereunder and Permitted Liens, Debtor owns each item of the
Collateral free and clear of any and all Liens, rights, or claims of all other Persons,
and Debtor shall defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to
cover any of the Collateral is on file in any public office other than (i)&nbsp;financing
statements in favor of the Secured Party, (ii)&nbsp;financing statements for which proper
termination statements have been delivered to the Secured Party for filing, and (iii)
financing statements filed in connection with Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Location of Debtor and Collateral</U>. The chief executive office of Debtor
is located at One Landmark Square, Stamford, Connecticut 06901. The primary copies of
the Account Records are located at, and all Accounts and General Intangibles are
maintained at, and controlled and directed (including, without limitation, for general
accounting purposes) from, such chief executive office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Accounts</U>. (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material
respects, the genuine, legal, valid, and binding obligation of the Account Debtor in
respect thereof, representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is
and will be, in all material respects, enforceable in accordance with its terms, (iii)
is not and will not be subject to any setoffs, defenses, taxes, counterclaims (except
(A)&nbsp;with respect to refunds, returns, and allowances in the ordinary course of business,
and (B)&nbsp;to the extent that such Account may not yet have been earned by performance),
and (iv)&nbsp;is and will be, in all material respects, in compliance with all applicable
laws, whether federal, state, local, or foreign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Accounts which are evidenced by Chattel Paper require the consent of the
Account Debtor in respect thereof in connection with their assignment hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<U>Tradenames; Prior Names</U>. Debtor has not conducted business under any
name other than its current name during the last five years.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IV</B></U>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Further Assurances</U>. At any time and from time to time, upon the request
of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly
execute and
deliver any and all such further instruments, endorsements, powers of attorney, and
other
documents, make such filings, give such notices, and take such further action as the
Secured
Party may reasonably deem desirable in obtaining the full benefits of this Agreement
and the
rights, remedies, and powers herein granted, including, without limitation, the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the filing of financing statements, in form acceptable to the
Secured Party under the Uniform Commercial Code in effect in any
jurisdiction with respect to the liens and security interests granted
hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the performance of all searches of public records deemed necessary
by the Secured Party to establish and determine the priority of the
security interests of the Secured Party or to determine the presence or
priority of other secured parties; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the furnishing to the Secured Party from time to time of reports
and schedules in connection with the Collateral as required pursuant to
the Credit Agreement, all in reasonable detail and in form reasonably
satisfactory to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Change of Chief Executive Office</U>. Debtor will not move its chief
executive
office except to such new location as Debtor may establish in accordance with the
last sentence
of this Section. The originals of all Account Records and General Intangibles will
be kept at
such chief executive office or at the locations referred to in Section&nbsp;3.3, or at
such new locations
as Debtor may establish in accordance with the last sentence of this Section. All
Accounts,
Account Records, and General Intangibles of Debtor will be maintained at and
controlled and
directed (including, without limitation, for general accounting purposes) from the
locations
referred to in Section&nbsp;3.3 or such new locations as the Debtor may establish in
accordance with
the last sentence of this Section. With respect to any new location, promptly upon
the request of
the Secured Party, Debtor shall take all such action as the Secured Party may
request to maintain
the security interest of the Secured Party in the Collateral granted hereby at all
times fully
perfected with the same or better priority and in full force and effect. Debtor
shall not establish a
new location for its chief executive office or such activities (or move any such
activities from the
locations referred to in Section&nbsp;3.3) until it shall have given to the Secured
Party not less than ten
days&#146; prior written notice of its intention to do so, clearly describing such new
location and
providing such other information in connection therewith as the Secured Party may
reasonably
request.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Change of Name or Corporate Structure</U>. Debtor shall not change its name
or corporate structure or conduct business under any name other than its current name
without giving notice thereof to the Secured Party within ten days thereafter, clearly
describing such new name, or corporate structure or such new tradename and providing such
other information in connection therewith as the Secured Party may reasonably request.
With respect to such new name, corporate structure, or tradename, promptly upon the
request of the Secured Party, Debtor shall take all such action as the Secured Party may
reasonably request to maintain the security interest of the Secured Party in the
Collateral granted hereby at all times fully perfected with the same or better priority
and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause
to be kept and maintained, at its own cost and expense satisfactory and complete records
of the Collateral, including, but not limited to, the originals of all documentation
with respect to all Accounts and General Intangibles and records of all payments
received and all credits granted on the Accounts, all merchandise returned, and all
other dealings therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to
Debtor have full and free access during normal business hours of Debtor to all the
books, correspondence, and records of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Possession of Collateral</U>. The Secured Party shall be deemed to have
possession of any of the Collateral in transit to it or set apart for it. Otherwise the
Collateral shall remain in Debtor&#146;s constructive possession and control at all times, at
Debtor&#146;s risk of loss, and shall (except for sales permitted by Section&nbsp;6.4 of the
Credit Agreement) be kept at the locations represented in Section&nbsp;3.3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
<U>Financing Statement Filings; Notifications</U>. Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed with the
offices of the Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will
immediately notify the Secured Party of any condition or event that may change the
proper location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a security interest in the Collateral. Without
limiting the generality of the foregoing, Debtor will (a)&nbsp;notify the Secured Party
within a reasonable period of time in advance of any change to a jurisdiction other than
as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief place of
business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning
the Accounts and the General Intangibles and the original of all the Accounts Records,
or (iii)&nbsp;in the &#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC,
and (b)&nbsp;immediately notify Secured Party of any change in Debtor&#146;s name. In any notice
furnished pursuant to this Section, Debtor will expressly state that the notice is
required by this Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE V</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U> <B>ACCOUNTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured
Party), Debtor shall remain liable under each of the Accounts to observe and perform all
the conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account. The Secured
Party shall have no obligation or liability under any Account (or any agreement giving
rise thereto) by reason of or arising out of this Agreement or the receipt by the
Secured Party of any payment relating to such Account pursuant hereto, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of Debtor
under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action to
enforce any performance, or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Collections on Accounts</U>. Prior to the occurrence of an Event of Default,
the Secured Party hereby authorizes Debtor to collect the Accounts. At any time following
and during the continuance of any Event of Default, the Secured Party may curtail or
terminate said authority at any time and itself, or by its agents, collect all Accounts,
and any payments of Accounts collected by Debtor shall be held by Debtor in trust for the
Secured Party, segregated from other funds of Debtor. All Proceeds, while held by the
Secured Party (or by Debtor in trust for the Secured Party) shall continue to be
Collateral securing all of the Secured Obligations and shall not constitute payment
thereof until applied as hereinafter provided.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VI</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U> <B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes
and appoints the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact, with full irrevocable power and
authority in the place and stead of Debtor and in the name of Debtor or in its own name,
from time to time in the discretion of the Secured Party, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the foregoing,
Debtor hereby gives the Secured Party the power and right, on behalf of Debtor, without
notice to or assent by the Debtor, to do the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of any Account, at any time when the authority of
Debtor to collect the Accounts has been curtailed or terminated pursuant
hereto, or in the case of any other Collateral, at any time when any Event
of Default shall have occurred and be continuing, in the name of Debtor or
its own name, or otherwise, to take possession of and indorse and collect
any checks, drafts, notes,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">acceptances, or other instruments for the payment of moneys due
under, or with respect to, any Collateral; in the name of Debtor or
otherwise to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party or as the Secured Party shall
direct; to ask or demand for, collect, receive payment of, and receipt for,
any and all moneys, claims, and other amounts due or to become due at any
time in respect of or arising out of any Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) at any time when an Event of Default shall have occurred and be
continuing, to prepare, sign, and file financing statements and amendments
thereto in the name of Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) at any time when an Event of Default shall have occurred and be
continuing, to take or cause to be taken all actions necessary to perform
or comply or cause performance or compliance with the terms of this
Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to
effect any repairs or obtain any insurance called for by the terms of this
Agreement, and to pay all or any part of the premiums therefor and the
costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) upon the occurrence and during the continuance of any Event of
Default, (i)&nbsp;to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtor,
assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii)&nbsp;to commence and prosecute any suits, actions,
or proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any portion thereof and to enforce any other
right in respect of any Collateral, (iii)&nbsp;to defend any suit, action, or
proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to
settle, compromise, or adjust any suit, action, or proceeding described in
the preceding clause and, in connection therewith, to give such discharges
or releases as the Secured Party may deem appropriate, and (v)&nbsp;generally,
to sell or transfer and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes, and to do,
at the option of the Secured Party and the expense of Debtor, at any time,
or from time to time, all acts and things which the Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and the
Liens of the Secured Party thereon and to effect the intent of this
Agreement, all as fully and effectively as Debtor might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) at any time when an Event of Default shall have occurred and be
continuing, to execute, in connection with any foreclosure, any
endorsements, assignments, or other instruments of conveyance or transfer
with respect to the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power coupled with an interest and shall be
irrevocable
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">so long as any Obligation remains outstanding or any Commitment exists. Debtor
hereby acknowledges and agrees that in acting pursuant to this power-of-attorney the
Secured Party shall be acting in its own interest and shall have no fiduciary duties to
the Debtor, and Debtor hereby waives any claims to the rights of a beneficiary of a
fiduciary relationship hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the
Secured Party hereunder are solely to protect the interests of the Secured Party in the
Collateral and shall not impose any duty upon the Secured Party to exercise any such
powers. The Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and, except for its own gross
negligence, neither it nor any of its officers, directors, employees, or agents shall be
responsible to the Debtor for any act or failure to act hereunder.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VII</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REMEDIES; RIGHTS UPON DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the rights
of a secured party under the UCC, all rights now or hereafter existing under all other
applicable laws, and, subject to any mandatory requirements of applicable law then in
effect, all rights set forth in this Agreement and the other Loan Documents. No
enumeration of rights in this Section or elsewhere in this Agreement or in any other
Loan Document or other agreement shall be deemed to in any way limit the rights of the
Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Proceeds</U>. If an Event of Default shall occur and be continuing, in
addition to the rights of the Secured Party specified with respect to the payment of
Accounts, (a)&nbsp;all Proceeds received by Debtor consisting of cash, checks, and other
near-cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor, and shall forthwith upon receipt by Debtor, be turned over to the
Secured Party, in the same form received by Debtor (appropriately indorsed or assigned
by the Debtor to the order of the Secured Party or in such other manner as shall be
satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds received by the
Secured Party (whether from Debtor or otherwise), or any part thereof, shall be applied
by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Collection of Accounts</U>. If an Event of Default shall occur and be
continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Secured Party may instruct the obligor or obligors on any
obligation owing or purporting to be owed to Debtor constituting the
Collateral (including, without limitation, the Accounts) to make any
payment required by the terms of such obligation directly to the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Secured Party shall have the right from time to time to
modify (including, without limitation, to extend the time for payment or
arrange for payment in installments) or waive rights under any such
obligation and to compromise or settle counterclaims or setoffs with the
obligor under any such obligation; and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any and all of such proceeds of such collections paid to the
Secured Party, or any part thereof, (after deduction of the Secured Party&#146;s
expenses of collection, including, without limitation, reasonable
attorneys&#146; fees and disbursements), shall be applied by the Secured Party
as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Disposition of Collateral</U>. If an Event of Default shall occur and be
continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Secured Party may direct Debtor to sell, assign, or otherwise
liquidate or dispose of all or from time to time any portion of the
Collateral, and Debtor shall do so, and the Secured Party may take
possession of the Proceeds of such Collateral. The Secured Party may direct
Debtor to direct that all Proceeds of such Collateral be paid directly to
the Secured Party or may permit the Proceeds of such Collateral to be paid
to Debtor and all such Proceeds consisting of cash, checks, or near-cash
items shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor in a separate deposit account containing only
Proceeds and shall forthwith upon receipt by Debtor, be turned over to the
Secured Party, in the same form received by Debtor (appropriately indorsed
or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any and all such Proceeds received by the Secured Party (whether
from Debtor or otherwise), shall be applied by the Secured Party as
provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts</U>. If an Event of Default shall occur and be
continuing, the Secured Party may liquidate any securities held in any accounts of
Debtor and apply the proceeds thereof and any other amounts held in any accounts of
Debtor as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral</U>. If an Event of Default shall occur and be
continuing, (a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately
retake possession of the Collateral (including the originals of all or any Accounts and
Account Records) or any part thereof, from Debtor or any other Person which then has
possession of any part thereof with or without notice or judicial process, and for that
purpose may enter upon Debtor&#146;s premises where any of the Collateral is located and
remove the same and may make reasonable use in connection with such removal of any and
all services, supplies, aids, and other facilities of Debtor, and (b)&nbsp;upon three days&#146;
notice to Debtor, Debtor shall, at its own expense, assemble the Collateral, including,
without limitation, the originals of all Account Records (or from time to time any
portion thereof) and make it available to the Secured Party by delivery to the Secured
Party at any location designated by the Secured Party which is reasonably convenient to
both parties, whether at the premises of Debtor or the Secured Party or elsewhere. Debtor
shall, at its sole expense, store and keep any Collateral so assembled at such place or
places pending further action by the Secured Party and while the Collateral shall be so
stored and kept, provide such guards and maintenance services as shall be reasonably
necessary to protect the same and to preserve and maintain the Collateral in good
condition. Debtor&#146;s obligation to so assemble and deliver the Collateral is of the
essence of this Agreement and, accordingly, upon application to a
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">court of equity having jurisdiction, the Secured Party shall be entitled to a decree
requiring specific performance by the Debtor of such obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and
be continuing, the Secured Party may sell, assign, lease, give an option or options to
purchase, or otherwise dispose of the Collateral (or contract to do any of the
foregoing) under one or more contracts or as an entirety, and, to the extent permitted
by applicable law, without the necessity of gathering at the place of sale the property
to be sold, at public or private sale or sales, conducted by any officer, nominee or
agent of, or auctioneer or attorney for the Secured Party at any location of any third
party conducting or otherwise involved in such sale or any office of the Secured Party
or elsewhere and in general in such manner, at such time or times and upon such terms
and conditions and at such price as may be commercially reasonable, for cash or on
credit or for future delivery without assumption of any credit risk. Any of the
Collateral may be sold, leased, assigned, or options or contracts entered to do so, or
otherwise disposed of, in the condition in which the same existed when taken by the
Secured Party or after any overhaul or repair which may be commercially reasonable. Any
such disposition which shall be a private sale or other private proceeding shall be made
upon not less than ten days&#146; written notice to Debtor specifying the time after which
such disposition is to be made and the intended sale price or other consideration
therefor. Any such disposition which shall be a public sale shall be made upon not less
than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the
option or the Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law, the
Secured Party may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section without accountability to
Debtor (except to the extent of surplus money received) as provided below. In the
payment of the purchase price of the Collateral, the purchaser shall be entitled to have
credit on account of the purchase price thereof of amounts owing to such purchaser on
account of any of the Secured Obligations and any such purchaser may deliver notes,
claims for interest, or claims for other payment with respect to such Secured
Obligations in lieu of cash up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder
shall be less than the amount due thereon, shall be returned to the holder thereof after
being appropriately stamped to show partial payment. Notwithstanding the foregoing, if
the Collateral or any portion thereof is perishable or threatens to decline speedily in
value or is of a type customarily sold in a recognized market only such notice as shall
be reasonably practicable shall be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to satisfy the
Secured Obligations. Debtor shall also be liable for all reasonable expenses of the
Secured Party incurred in connection with collecting such deficiency, including, without
limitation, the reasonable fees and disbursements of any attorneys employed by the
Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses; Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for
all its reasonable expenses in connection with the exercise of its rights and remedies
hereunder, including, without limitation, reasonable attorneys&#146; fees and legal expenses
incurred by the Secured Party.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds</U>. The proceeds of any disposition of
Collateral shall be
applied as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>first, </I>to payment or reimbursement of that portion
of the Obligations constituting fees, expenses and indemnities payable
to the Agent in its capacity as such;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>second, </I>pro rata to payment or reimbursement of that
portion of the Obligations constituting fees, expenses and indemnities
payable to the Lenders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>third, </I>pro rata to payment of accrued interest on the Loans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>fourth, </I>pro rata to payment of principal
outstanding on the Loans and Obligations owed to any Lender or
affiliate of any Lender under any Commodity Hedge Agreement or Rate
Management Transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>fifth, </I>pro rata to any other Obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>sixth, </I>to serve as cash collateral to be held by
the Agent to secure the LC Exposure; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>seventh, </I>any excess, after all of the Obligations
shall have been indefeasibly paid in full in cash, shall be paid to
the Borrower or as otherwise required by any Governmental Authority.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral</U>. The Secured
Party&#146;s sole duty with respect to the custody, safekeeping, and physical preservation of
the Collateral in its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be
to deal with it in the same manner as the Secured Party deals with similar property for
its own account. The Secured Party shall have no obligation to take any steps to
preserve rights against prior parties to any Collateral. Except for matters constituting
gross negligence, neither the Secured Party nor any of its directors, officers,
employees, or agents shall be liable for failure to demand, collect, or realize upon all
or any part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims</U>. Except as otherwise provided in this Agreement,
Debtor hereby waives, to the extent permitted by applicable law, notice of and judicial
hearing in connection with the Secured Party&#146;s taking possession or the Secured Party&#146;s
disposition of any of the Collateral in accordance herewith, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy or remedies
and any such right which the Debtor would otherwise have under the constitution or any
statute of the United States or any state, and Debtor hereby further waives, to the
extent permitted by law:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the gross negligence of the Secured
Party;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all other requirements as to the time, place, and terms of
sale or other requirements with respect to the enforcement of the rights of
the Secured Party hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) demand of performance or other demand, notice of intent to demand
or accelerate, notice of acceleration, presentment, protest, advertisement,
or notice of any kind to or upon Debtor or any other Person, except as may
be required by the Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all rights of redemption, appraisement, valuation, diligence,
stay, extension, or moratorium now or hereafter in force under any
applicable law in order to stay or delay the enforcement of this Agreement,
including the absolute sale of the Collateral or any portion thereof, and
Debtor, for itself and all who may claim under it, insofar as it or they
now or hereafter lawfully may, hereby waives the benefit of all such laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this Agreement by
foreclosure, sale, entry, or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason, then and in every such case, Debtor and the Secured Party
shall be returned to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and all rights,
remedies, and powers of the Secured Party shall continue as if no such proceeding had
been instituted.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VIII</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <B><U>INDEMNITY</U>.</B> (a)&nbsp;<B>DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE
INDEMNITEES HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
(INCLUDING REASONABLE ATTORNEYS&#146; FEES AND EXPENSES) (FOR THE PURPOSES OF THIS SECTION
ALL OF THE FOREGOING ARE COLLECTIVELY CALLED &#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE
WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY
WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF ANY
RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE
INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE GROSS
NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 14 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any
assertion that could give rise to an Expense, Debtor shall assume full responsibility for
the defense thereof. Without limiting the application of part (a)&nbsp;of this Section, Debtor
agrees to pay or reimburse such Indemnitee on demand for any and all reasonable fees,
costs, and expenses of whatever kind or nature incurred in connection with the creation,
preservation, or protection of the Secured Party&#146;s Liens on, and security interests in,
the Collateral, including, without limitation, all reasonable fees and taxes in
connection with the recording or filing of instruments and documents in public offices,
payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable
expenses incurred in the custody, preservation, use, or operation of the Collateral when
Collateral is in the Secured Party&#146;s possession, and all other reasonable fees, costs,
and expenses in connection with protecting, maintaining, or preserving the Collateral and
the Secured Party&#146;s interest therein, whether through judicial proceedings or otherwise,
or in defending or prosecuting any actions, suits, or proceedings arising out of or
relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor
agrees to pay, indemnify, and hold each Indemnitee harmless from and against any
Expenses which such Indemnitee may suffer, expend, or incur in consequence of or growing
out of any misrepresentation by any Debtor in this Agreement or in any statement or
writing contemplated by or made or delivered pursuant to or in connection with this
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are
unenforceable for any reason, Debtor hereby agrees to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under applicable
law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral; Survival</U>. Any amounts paid
by any Indemnitee as to which such Indemnitee has the right to reimbursement shall
constitute Secured Obligations secured by the Collateral. The indemnity obligations of
the Debtor contained in this Article&nbsp;VIII shall continue in full force and effect
notwithstanding the full payment and performance of the Secured Obligations and the
termination of this Agreement.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IX</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>No Waiver; Remedies Cumulative</U>. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no course of
dealing between any Debtor and the Secured Party shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other right,
power, or privilege. A waiver by the Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise have on any future occasion. The rights and remedies
herein expressly provided are cumulative, may be exercised singly or concurrently and as
often and in such order as the Secured Party deems expedient, and are not exclusive of
any rights or remedies which the Secured Party would otherwise have whether by agreement
or now or hereafter existing under applicable law. No notice to or demand on Debtor in
any case shall entitle Debtor to any other or further notice or demand in similar or
other circumstances or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">constitute a waiver of the rights of the Secured Party to any other or further
action in any circumstances without notice or demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Termination; Release</U>. When the Secured Obligations have been
indefeasibly paid and performed in full and the Commitment has terminated, this Agreement
shall terminate, and the Secured Party, at the request and sole expense of Debtor, will
execute and deliver to Debtor the proper instruments (including Uniform Commercial Code
termination statements) acknowledging the termination of this Agreement, and will duly
assign, transfer, and deliver to Debtor, without recourse, representation, or warranty of
any kind whatsoever, such of the Collateral as may be in possession of the Secured Party
and has not theretofore been disposed of, applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts</U>. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to
marshall any assets in favor of Debtor or any other Person or against or in payment of
any or all of the Secured Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Severability</U>. In case any provision in or obligation under this
Agreement or the Secured Obligations shall be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall not in
any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications</U>. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall
be in writing (including by telecopy). Unless otherwise expressly provided herein, any
such notice, request, or communication shall be deemed to have been duly given or made
when provided in accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to
the benefit of Debtor, the Secured Party, and their respective legal representatives,
successors, and assigns. No other Person shall have any right, benefit, priority, or
interest hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such provisions may
be freely waived in whole or in part by the Secured Party at any time if the Secured
Party in its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the amendment,
supplement, modification, discharge, or termination is sought.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U><B>ENTIRE AGREEMENT</B></U><B>.</B> <B>THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY
PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO RELATING TO THE
SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS
OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U><B>GOVERNING LAW</B></U><B>.</B> <B>THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS).</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U><B>JURISDICTION AND VENUE</B></U><B>.</B> <B>ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH ANY DEBTOR IS A PARTY MAY BE LITIGATED, AT
THE SOLE DISCRETION AND ELECTION OF THE SECURED PARTY, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY
RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE SECURED PARTY IN ACCORDANCE WITH THIS SECTION.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement is executed as of the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U><B>DEBTOR</B></U><B>:</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>PRIMEENERGY CORPORATION</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>PRIMEENERGY MANAGEMENT</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>CORPORATION, PRIME OPERATING</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>COMPANY, EASTERN OIL WELL SERVICE</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>COMPANY, SOUTHWEST OIL FIELD</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>CONSTRUCTION COMPANY</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>EOWS MIDLAND COMPANY</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Beverly A. Cummings
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Treasurer, and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U><B>SECURED PARTY</B></U><B>:</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>GUARANTY BANK, FSB, </B>as Agent</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ David M. Butler
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
David M. Butler
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 19 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT A</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;3.1:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FILING LOCATIONS</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Delaware</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of New York</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Texas</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of West Virginia</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">County Clerk of Oklahoma County, Oklahoma</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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</BODY>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.3
<SEQUENCE>6
<FILENAME>d44173exv10w23w3.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT (MEMBERSHIP PLEDGE)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.23.3
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED SECURITY AGREEMENT<BR>
(Membership Pledge)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><b>BY</b>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PRIMEENERGY CORPORATION</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>IN FAVOR OF</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GUARANTY BANK, FSB, as Agent</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>December&nbsp;28, 2006</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 60%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 16pt"><B>CREDIT FACILITY TO PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT CORPORATION<BR>
PRIME OPERATING COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY<BR>
SOUTHWEST OILFIELD CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B><BR>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 60%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><b>Page</b></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 1 DEFINITIONS AND INTERPRETATION</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Credit Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Texas Business and Commerce Code
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 2 SECURITY INTEREST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Grant of Security Interest in Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delivery of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 3 REPRESENTATIONS AND WARRANTIES</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Status of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Misstatements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ownership and Liens
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 4 COVENANTS AND AGREEMENTS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Assessments and Charges
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delivery of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prohibited Liens and Filings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 5 RIGHTS AND REMEDIES</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Remedies Upon Default
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voting Rights, Dividends, Etc. Prior to Default
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voting Rights, Dividends, Etc. After Default
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proceeds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agent Duties
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Agent&#146;s Actions
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">ARTICLE 6 MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transfer of Obligations and Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cumulative Security
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Continuing Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cumulative Rights
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exercise of Rights
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Remedy and Waiver
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-Judicial Remedies
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Preservation of Liability
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><b>Page</b></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">6.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment and Waiver
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalidity
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jurisdiction and Venue
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Rights to Jury Trial
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED SECURITY AGREEMENT<BR>
(MEMBERSHIP PLEDGE)</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS AMENDED AND RESTATED SECURITY AGREEMENT </B>(Membership Pledge) (this &#147;<U>Security
Agreement</U>&#148;) dated as of December&nbsp;28, 2006, is entered into by and between <B>PRIMEENERGY CORPORATION,</B>
a Delaware corporation (the &#147;<U>Pledgor</U>&#148;), and <B>GUARANTY BANK, FSB, </B>a federal savings bank as agent for
the benefit of the Lenders (the &#147;<U>Agent</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>W</U> <U>I</U> <U>T</U> <U>N</U> <U>E</U> <U>S</U> <U>S</U> <U>E</U> <U>T</U> <U>H</U>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Credit Agreement dated December
19, 2002, executed in connection with a revolving loan extended to PRIMEENERGY CORPORATION, et
al., by Agent and the Lenders, as amended by First Amendment dated June&nbsp;1, 2003 and Second
Amendment dated September&nbsp;22, 2003, as amended by Third Amendment to Credit Agreement dated
effective as of February&nbsp;17, 2004, as amended by Fourth Amendment to Credit Agreement dated
December&nbsp;28, 2004, as amended by Fifth Amendment to Credit Agreement dated March&nbsp;18, 2005, and as
amended by Letter Amendments to Credit Agreement dated August&nbsp;4, 2005, December&nbsp;16, 2005 and May
12, 2006, as amended by Amended and Restated Credit Agreement dated December&nbsp;28, 2006, as such
agreement may be amended, restated, or supplemented from time to time (the &#147;<U>Credit Agreement</U>&#148;),
the Agent and the Lenders have agreed to extend credit to or for the benefit of the Pledgor;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Pledgor is the owner of the shares of issued and outstanding membership interest
described in Schedule&nbsp;I hereof (the &#147;<U>Securities</U>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Pledgor and Agent entered into a Security Agreement (Membership Pledge) dated as
of June&nbsp;6, 2006, and the parties hereto desire to amend and restate such Security Agreement
(Membership Pledge);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms of the Credit Agreement, and as an inducement to the Agent and
the Lenders to extend credit to or for the benefit of the Pledgor pursuant to the Credit Agreement
the Pledgor has agreed to execute this Security Agreement in favor of the Agent for the benefit of
the Lenders;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 1</B><BR>
<U><B>DEFINITIONS AND INTERPRETATION</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above.</U> As used in this Security Agreement, the terms
&#147;<U>Agent</U>,&#148; &#147;<U>Credit Agreement</U>,&#148;
&#147;<U>Pledgor</U>,&#148; &#147;<U>Security Agreement</U>,&#148; and &#147;<U>Securities</U>&#148; will have the
meanings indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2
<U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used in this Security Agreement, the following
terms will have the meanings indicated:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) &#147;<U>Collateral</U>&#148; will mean the Securities and all certificates or agreements
representing or granting rights in the Securities; all dividends, cash, instruments and
other Property from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the Securities, including, without limitation, all
additional shares of stock of the entities listed on Schedule&nbsp;I from time to time acquired
by the Pledgor by way of stock dividend or stock split; the certificates representing such
additional shares; all dividends, cash, instruments or other Property from time to time
received, receivable or otherwise distributed in respect of or in exchange for any or all of
such additional shares; and all proceeds of any of the foregoing in this definition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;<U>Event of Default</U>&#148; shall mean any Event of Default, as defined in the
Credit Agreement, or the failure of the Pledgor to comply with Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Security Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Terms Defined in Texas Business and Commerce Code</U>. Any term used herein that is
defined in the Texas Business and Commerce Code shall have the meaning assigned to such term
therein, unless the context otherwise requires or such term is otherwise defined herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148;
&#147;hereinafter,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this
Security Agreement shall refer to this Security Agreement as a whole and not to any particular
Article, Section, or provision of this Security Agreement. References in this Security Agreement
to Article or Section numbers are to such Articles or Sections of this Security Agreement unless
otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Articles and Sections</U>. This Security Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and other legal relations
of the parties hereto shall be determined from this instrument as an entirety and without regard to
the aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 <U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 2</B><BR>
<U><B>SECURITY INTEREST</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Grant of Security Interest in Collateral</U>. The Pledgor, for value
received, the receipt and sufficiency of which are hereby acknowledged, and to induce the Agent to
extend credit to or for the benefit of the Pledgor, hereby pledges to the Agent, and its successors
and assigns, and hereby grants to the Agent, and its successors and assigns, a first lien on and a
security interest in the membership interest described on Schedule&nbsp;I (&#147;Collateral&#148;) to secure the
Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Delivery of Collateral</U>. All certificates or instruments representing or
evidencing the Securities shall be delivered to and held by the Agent for the sole purpose of
possession of the Collateral or any portion thereof pursuant to this Security Agreement, and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to the Agent. The Agent
shall at all times have actual possession of the Securities and shall be deemed to have possession
of any of the Collateral in transit to it or set apart for it.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Power of Attorney</U>. The Pledgor hereby irrevocably constitutes and appoints the
Agent and any authorized officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in its own name, from time to time in the discretion of
the Agent, for the purpose of carrying out the terms of this Security Agreement, and without notice
to the Pledgor, to take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of this Security
Agreement, including, without limitation, the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) to transfer to or register any or all of the Collateral in the name of the Agent or
any of its nominees;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to exchange the certificates or instruments representing or evidencing the
Collateral for certificates or instruments of smaller or larger denominations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) upon the occurrence and during the continuance of any Event of Default, (i)&nbsp;to
receive payment of and receipt for any and all moneys, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral, (ii)&nbsp;to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral, (iii)&nbsp;to defend any suit, action or proceeding brought against
the Pledgor with respect to any Collateral, (iv)&nbsp;to settle, compromise or adjust any suit,
action or proceeding described above and, in connection therewith, to give such discharges
or releases as the Agent may deem appropriate, and (v)&nbsp;to complete any blanks contained in
any instruments of transfer or assignment appended to or delivered with the certificates
representing the Securities; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) to exchange any of the Collateral for other Property upon reorganization,
recapitalization or other readjustment of any of the issuers of the Securities and in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">connection therewith to deposit any of the Collateral with any committee or depository upon
such terms as the Agent may determine; and, subsequent to any Event of Default, to
exercise, at the option of the Agent, voting rights as to any of the Collateral;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">all without notice and without liability except to account for Property actually received by the
Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Pledgor hereby ratifies all that said attorney shall lawfully do or cause to be done
within the scope of the power of attorney granted hereunder. This power of attorney is a power
coupled with an interest and shall be irrevocable so long as any Obligation remains outstanding or
any Commitment exists. The powers conferred on the Agent hereunder are solely to protect the
interests of the Agent in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Agent shall be accountable only for amounts that it actually receives as a result
of the exercise of such powers, and neither it nor any of its officers, directors, employees, or
agents shall be responsible to the Pledgor for any act or failure to act, except for gross
negligence.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 3</B><BR>
<U><B>REPRESENTATIONS AND WARRANTIES</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To induce the Agent to enter into the Credit Agreement and to make Loans to or for the
benefit of the Pledgor, the Pledgor represents and warrants to the Agent (which representations
and warranties shall survive the delivery of this Security Agreement and the other Loan Documents)
that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Status of Collateral</U>. All signatures on the certificates evidencing the
Securities are genuine or authorized; the transfer of the Securities by the Pledgor to the Agent
are effective; and the Pledgor knows of no fact that might impair the validity of the Securities.
The Securities (a)&nbsp;have been duly authorized, validly issued, drawn, made, and/or accepted, (b)&nbsp;are
genuine, validly outstanding, fully paid, and nonassessable, (c)&nbsp;were not issued in violation of
the preemptive rights of any Person or any agreement by which the Pledgor or any issuer of such
Collateral is bound, and (d)&nbsp;have not been materially altered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>No Material Misstatements</U>. No information, exhibit, or report furnished by the
Pledgor to the Agent in connection with the negotiation of this Security Agreement contained or
contains any material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein, in light of the circumstances in which they
were made, not misleading.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Ownership and Liens</U>. Except for the security interest in favor of the Agent, the
Pledgor owns (and at the time of transfer or delivery of the Collateral to the Agent owned or will
own) good and indefeasible title to the Collateral free and clear of any other security interests,
liens, adverse claims, or options; the Pledgor has (and at the time of transfer or delivery of the
Collateral to the Agent had or will have) full right, power, and authority to convey, assign,
transfer, and deliver the Collateral to the Agent and to grant a security interest in the
Collateral to the Agent in the manner provided herein.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 4</B><BR>
<U><B>COVENANTS AND AGREEMENTS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless agreed in writing by the Agent to the contrary, the Pledgor agrees, so long as any
Obligation remains outstanding or unpaid or any Commitment exists:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Payment of Assessments and Charges</U>. To pay all taxes, charges, liens and
assessments against the Collateral; and upon the failure of the Pledgor to do so, the Agent at its
option may, but will not be obligated to, pay any of them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Delivery of Collateral</U>. That any and all (a)&nbsp;dividends paid or payable other than
in cash and all instruments and other property received, receivable or otherwise distributed in
respect of or in exchange for any Collateral, (b)&nbsp;dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, and
(c)&nbsp;cash paid, payable or otherwise distributed in respect of principal of, in redemption of or in
exchange for any Collateral, shall be forthwith delivered to the Agent to hold as Collateral for
the benefit of the Agent and shall, if received by the Pledgor, be received in trust for the
benefit of the Agent, be segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Agent as Collateral in the same form as so received (with any necessary
endorsement).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Further Assurances</U>. To promptly cure any defects in the execution and delivery of
this Security Agreement and execute, acknowledge, and deliver such other assurances and instruments
and take such other action as shall, in the opinion of the Agent, be necessary to fulfill the terms
of this Security Agreement and to confirm, perfect, and preserve the security interest created and
intended to be created hereby and to vest more completely in and assure to the Agent its rights
under this Security Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Prohibited Liens and Filings</U>. That it will not pledge, mortgage, or otherwise
encumber, create, or suffer a security interest to exist in any of the Collateral (other than in
favor of the Agent) or sell, assign, or otherwise transfer any of the Collateral to anyone other
than the Agent or file or permit to be filed any financing statement or other security instrument
with respect to the Collateral other than in favor of the Agent.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 5</B><BR>
<U><B>RIGHTS AND REMEDIES</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Remedies Upon Default</U>. Upon the occurrence and during the continuance of an Event
of Default, the Agent may, at its option, declare all Obligations immediately due and payable,
without presentment, demand, protest, notice of protest, default or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity or other notice of any kind, all of which
are hereby expressly waived by the Pledgor, and may exercise any and all other remedies provided
by law or pursuant to the Loan Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If all or any part of the Obligations shall become due and payable, the Agent may
then, or at any time thereafter, apply, set-off, collect, sell in one or more sales, or
otherwise dispose of, any or all of the Collateral, in its then condition or following any
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">commercially reasonable preparation or processing, in such order as the Agent may elect. Any
such sale may be made either at public or private sale at the place of business of the
Agent, any brokers&#146; board or securities exchange or elsewhere, either for cash or upon
credit or for future delivery, at such price as the Agent may deem fair. The Agent may be
the purchaser of any or all Collateral so sold and may hold the same thereafter in its own
right free from any claim of the Pledgor or right of redemption. No such purchase or holding
by the Agent shall be deemed a retention by the Agent in satisfaction of the Obligations.
All demands, notices, and advertisements, and the presentment of property at sale are hereby
waived. If, notwithstanding the foregoing provisions, any applicable provision of the
Uniform Commercial Code or other law requires the Agent to give reasonable notice of any
such sale or disposition or other action, ten days&#146; prior written notice shall constitute
reasonable notice. The Agent may require the Pledgor to assemble the Collateral and make it
available to the Agent at a place designated by the Agent that is reasonably convenient to
the Agent and the Pledgor. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In connection with the sale of Collateral which is stock or other investment
securities, the Agent must limit prospective purchasers to the extent deemed necessary or
advisable by the Agent to render such sale exempt from the registration requirements of the
Securities Act of 1933, as amended (the &#147;Act&#148;), and any applicable state securities laws.
No sale so made in good faith by the Agent shall be deemed not to be &#147;commercially
reasonable&#148; because so made; provided, however, that nothing in this Security Agreement
shall be deemed to impose any obligation whatsoever to file a registration statement under
the Act or any state securities law with respect to any sale of Collateral by the Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2
<U>Voting Rights, Dividends, Etc. Prior to Default</U>. So long as no Event of
Default shall have occurred and be continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Pledgor will be entitled to exercise any and all voting and other consensual
rights pertaining to the Collateral or any part thereof for any purpose not inconsistent
with the terms of this Security Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) subject to the further provisions of this Security Agreement, the Pledgor shall be
entitled to receive and retain any and all dividends paid in respect of the Collateral;
provided, however, that any and all
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dividends paid or payable other than in cash and all
instruments and other Property received, receivable, or otherwise
distributed in respect of or in exchange for any Collateral,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total liquidation
or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, and</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 6 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) cash paid, payable or otherwise distributed in respect of
principal of, in redemption of or in exchange for any Collateral,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">shall be forthwith delivered to the Agent to hold as Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Agent, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Agent as Collateral in
the same form as so received (with any necessary endorsement); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Agent shall execute and deliver (or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the Pledgor may reasonably request for
the purpose of enabling the Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section&nbsp;5.2(a) above and to receive the dividends which it
is authorized to receive and retain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3
<U>Voting Rights, Dividends, Etc. After Default.</U> Upon the occurrence and during the
continuance of an Event of Default:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) at the option of the Agent with notice to the Pledgor, all rights of the Pledgor to
exercise the voting and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section&nbsp;5.2(a) above and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to Section&nbsp;5.2(b) above shall cease
and shall thereupon become vested in the Agent, who shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and hold as Collateral such
dividends; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all dividends which are received by the Pledgor contrary to the provisions of
Section&nbsp;5.3(a) above shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over to the Agent as
Collateral in the same form as so received (with any necessary endorsement).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Proceeds.</U> Prior to all or any part of the Obligations becoming due and payable as
specified in Section&nbsp;5.1, all cash sums or other property received by the Agent on account of the
Collateral shall be held as Collateral. After all or any part of the Obligations shall become due
and payable as specified in Section&nbsp;5.1, the proceeds of any sale or other disposition of the
Collateral and all sums received or collected by the Agent from or on account of the Collateral
shall be applied by the Agent as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)<I>&nbsp;first, </I>to payment or reimbursement of that portion of the Obligations constituting
fees, expenses and indemnities payable to the Agent in its capacity as such;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<I>&nbsp;second, </I>pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)<I>&nbsp;third, </I>pro rata to payment of accrued interest on the Loans;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<I>&nbsp;fourth, </I>pro rata to payment of principal outstanding on the Loans and Obligations
owed to any Lender or affiliate of any Lender under any Commodity Hedge Agreement or Rate
Management Transaction;
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)<I>&nbsp;fifth, </I>pro rata to any other Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)<I>&nbsp;sixth, </I>to serve as cash collateral to be held by the Agent to secure the LC
Exposure; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)<I>&nbsp;seventh, </I>any excess, after all of the Obligations shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise required
by any Governmental Authority.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <U>Agent Duties.</U> The Agent shall be under no duty whatsoever to make or give any
presentment, demand for performance, notice of nonperformance, protest, notice of protest, notice
of dishonor, or other notice or demand in connection with any Collateral or the Obligations, or to
take any steps necessary to preserve any rights against prior parties. The Agent shall not be
liable for failure to collect or realize upon any or all of the Obligations or Collateral, or for
any delay in so doing, nor shall the Agent be under any duty to take any action whatsoever with
regard thereto. The Agent shall use reasonable care in the custody and preservation of any
Collateral in its possession. The Agent shall have no duty to comply with any recording, filing,
or other legal requirements necessary to establish or maintain the validity, priority, or
enforceability of, or the rights of the Agent in or to, any of the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>The Agent&#146;s Actions.</U> The Pledgor waives any right to require the Agent to
proceed against any Person, exhaust any collateral or pursue any other remedy in the power of the
Agent; waives any and all notice of acceptance of this Security Agreement or of creation,
modification, renewal, or extension for any period of any Obligations; and waives any defense
arising by reason of any disability or other defense of any guarantor or other Person primarily or
secondarily liable with respect to all or any portion of the Obligations (&#147;Other Liable Party&#148;), or
by reason of the cessation from any cause whatsoever of the liability of any Other Liable Party.
All dealings between the Pledgor and the Agent shall conclusively be presumed to have been had or
consummated in reliance upon this Security Agreement. Until all Obligations shall have been paid
and/or performed in full and the Commitment shall have terminated, the Pledgor (a)&nbsp;shall have no
right to subrogation, (b)&nbsp;waives any right to enforce any remedy that the Agent now has or may
hereafter have against any Other Liable Party, and (c)&nbsp;except as otherwise expressly provided in
this Security Agreement, waives any benefit of and right to participate in any collateral or
security whatsoever now or hereafter held by the Agent.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 6</B><BR>
<U><B>MISCELLANEOUS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Transfer of Obligations and Collateral.</U> Subject to the terms of the Credit
Agreement, the Pledgor hereby agrees that the Agent may transfer any or all of the Obligations.
Upon any such transfer, the Agent may transfer its rights in the Collateral and shall be fully
discharged thereafter from all liability with respect to the Collateral so transferred, and the
transferee shall be vested with all rights, powers, and remedies of the Agent hereunder with
respect to Collateral so transferred. With respect to any Collateral not so transferred, the Agent
shall retain all rights, powers, and remedies hereby given. The Agent may at any time deliver any
or all of the Collateral to the Pledgor, whose receipt shall be a complete and full acquittance
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for the Collateral so delivered, and the Agent shall thereafter be discharged from any liability
therefor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Cumulative Security.</U> The execution and delivery of this Security Agreement in no
manner shall impair or affect any other security (by endorsement or otherwise) for the payment of
the Obligations. No security taken hereafter as security for payment of all or any portion of the
Obligations shall impair in any manner or affect this Security Agreement. All such present and
future additional security is to be considered as cumulative security.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Continuing Agreement.</U> This is a continuing agreement and the conveyance
hereunder shall remain in full force and effect and all the rights, powers, and remedies of the
Agent hereunder shall continue to exist until the Obligations shall be paid in full as the same
become due and payable, the Commitment has terminated, and the Agent, upon request of the Pledgor,
has executed a written termination statement, reassigned to the Pledgor, without recourse, the
Collateral and all rights and liens conveyed hereby and returned possession of the Collateral to
the Pledgor. Furthermore, it is contemplated by the parties hereto that there may be times when no
Obligations shall be owing. Notwithstanding such occurrences, this Security Agreement shall
remain valid and shall be in full force and effect as to subsequent Obligations provided that the
Agent has not executed a written termination statement and returned possession of the Collateral to
the Pledgor. Otherwise, this Security Agreement shall continue irrespective of the fact that the
liability of the Pledgor or any Other Liable Party may have ceased and notwithstanding the death or
incapacity of the Pledgor or any Other Liable Party or any other event or proceeding affecting the
Pledgor and/or any Other Liable Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Cumulative Rights.</U> The rights, powers, and remedies of the Agent hereunder shall
be in addition to all rights, powers, and remedies given by statute or rule of law and are
cumulative. The exercise of any one or more of the rights, powers, and remedies provided herein
shall not be construed as a waiver of any other rights, powers, and remedies. The Agent shall have
the rights, powers, and remedies of a secured party under the Texas Business and Commerce Code, as
amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Exercise of Rights.</U> Time shall be of the essence for the performance of any act
under this Security Agreement by the Pledgor, but neither the Agent&#146;s acceptance of partial or
delinquent payments nor any forbearance, failure, or delay by the Agent in exercising any right,
power or remedy shall be deemed a waiver of any obligation of the Pledgor or any Other Liable Party
or of any right, power, or remedy of the Agent or preclude any other or further exercise thereof;
and no single or partial exercise of any right, power, or remedy shall preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Remedy and Waiver.</U> The Agent may remedy or waive any default hereunder without
waiving the default remedied or waiving any prior or subsequent default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Non-Judicial Remedies.</U> The Agent may enforce its rights hereunder without prior
judicial process or judicial hearing. The Pledgor expressly waives, renounces, and knowingly
relinquishes any and all legal rights which might otherwise require the Agent to enforce its rights
by judicial process. In so providing for non-judicial remedies, the Pledgor recognizes and
concedes that such remedies are consistent with the usage of the trade, are
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">responsive to commercial necessity and are the result of bargain at arm&#146;s length. Nothing herein is
intended to prevent the Agent or the Pledgor from resorting to judicial process at such party&#146;s
option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Preservation of Liability.</U> Neither this Security Agreement nor the exercise by the
Agent of (or the failure to so exercise) any right, power, or remedy conferred herein or by law
shall be construed as relieving the Pledgor or any Other Liable Party from full liability thereon
and for any deficiency thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 <U>Notices and Other Communications.</U> Except as to verbal notices expressly
authorized herein, which verbal notices shall be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand, or other communication shall be deemed to have
been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited
in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;if to the Agent, to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">Guaranty Bank, FSB<BR>
333 Clay Street, Suite&nbsp;4400<BR>
Houston, Texas 77002<BR>
Attention: Kelly L. Elmore, III <BR>
Telecopy: (713) 890-8868
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;if to the Pledgor, to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">PrimeEnergy Corporation<BR>
One Landmark Square<BR>
Stamford, Connecticut 06901<BR>
Attention: Ms.&nbsp;Beverly A. Cummings<BR>
Telecopy: (203)&nbsp;358-5786
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any party may, by proper written notice hereunder to the others, change the individuals or
addresses to which such notices to it shall thereafter be sent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10 <U>Parties in Interest.</U> All covenants and agreements herein contained by or on
behalf of the Pledgor or the Agent shall be binding upon and inure to the benefit of the Pledgor or
the Agent, as the case may be, and their respective legal representatives, successors, and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11 <U>Amendment and Waiver.</U> This Security Agreement may not be amended nor may any of
its terms be waived except in writing duly signed by the party against whom enforcement of the
amendment or waiver is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12 <U>Invalidity.</U> If any provision of this Security Agreement is rendered or declared
illegal, invalid, or unenforceable by reason of any existing or subsequently enacted legislation or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by a judicial decision that has become final, the
 Pledgor and the Agent shall promptly meet and
negotiate substitute provisions for those rendered illegal, invalid, or unenforceable, but all of
the remaining provisions shall remain in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13 <U>
<B>Governing Law</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>This Security Agreement shall be deemed to be a
contract made under and shall be construed in accordance with and governed by the laws of
the State of Texas without giving effect to principles thereof relating to conflicts of law,
provided, however, that Vernon&#146;s Texas Civil Statutes, Article 5069, Chapter 15
(which regulates certain revolving credit loan accounts and revolving tri-party accounts) shall
not apply.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14 <U>
<B>Jurisdiction and Venue</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>All actions or proceedings with respect to,
arising directly or indirectly in connection with, out of, related to, or from this
Security Agreement or any other Loan Document to which the Pledgor is a party
may be litigated, at the sole discretion and election of the agent, in courts having situs in
Houston, Harris County, Texas. The Pledgor hereby submits to the jurisdiction of any local, state,
or federal court located in Houston, Harris County, Texas, and hereby waives any rights it may
have to transfer or change the jurisdiction or venue of any litigation brought against it by the
agent in accordance with this section.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15 <U>
<B>Waiver of Rights to Jury Trial</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>The Pledgor and the Agent hereby
knowingly, voluntarily, intentionally, irrevocably, and unconditionally waive all rights to
trial by jury in any action, suit, proceeding, counterclaim, or other litigation that relates to
or arises out of any of this security agreement or any other loan document or the acts or
omissions of the agent in the enforcement of any of the terms or provisions of this Security
Agreement or any other loan document or otherwise with respect thereto. The provisions of this
Section are a material inducement for the Agent entering into the Credit Agreement.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16 <U>
<B>Entire Agreement</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>This Security Agreement constitutes the entire
Agreement between the parties hereto with respect to the subject hereof and shall supersede any
prior agreements, whether written or oral, between the parties hereto relating to the subject
hereof. Furthermore, in this regard, this Security Agreement and the other written loan
documents represent, collectively, the final agreement among the parties thereto and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of such
parties. There are no unwritten oral agreements among such parties.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.17
<U>Counterparts</U>.
For the convenience of the parties, this Security Agreement
may be executed in multiple counterparts and by different parties hereto in separate counterparts,
each of which for all purposes shall be deemed to be an original and all of which together shall
constitute one and the same Security Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF,
this Security Agreement is executed as of the date first above written.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 11 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><u><B>PLEDGOR:</b></u><BR>
<BR>
<b>PRIMEENERGY CORPORATION</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp; </TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and<br>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>AGENT AND LENDER</b>: </U><BR>
<BR>
<b>GUARANTY BANK, FSB</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
David M. Butler &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David M. Butler &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>SCHEDULE I</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Class of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Membership</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Number of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Issuer</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Certificate No.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Shares</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prime Offshore L.L.C.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Common shares</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7,745,032</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Schedule&nbsp;I - i
</DIV>




</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.4
<SEQUENCE>7
<FILENAME>d44173exv10w23w4.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.23.4
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRIMEENERGY CORPORATION<BR>
PRIMEENERGY MANAGEMENT CORPORATION<BR>
PRIME OPERATING COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY<BR>
SOUTHWEST OILFIELD CONSTRUCTION COMPANY<BR>
EOWS MIDLAND COMPANY</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(DEBTOR)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GUARANTY BANK, FSB, AS AGENT<BR>
(SECURED PARTY)</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE I</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DEFINITIONS AND INTERPRETATION </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Credit Agreement </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">1.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE II</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GRANT OF SECURITY INTEREST </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE III</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">REPRESENTATIONS AND WARRANTIES </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Validity, Perfection and Priority </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Liens; Other Financing Statements </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Location of Debtor </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">3.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tradenames; Prior Names </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IV</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">COVENANTS </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Chief Executive Office </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Name or Corporate Structure </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title, Prohibited Liens and Filings </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inspection of Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">4.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filings; Notifications </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE V</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">POWER OF ATTORNEY </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">5.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment as Attorney-in-Fact </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">5.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Duty on the Part of Secured Party </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">REMEDIES; RIGHTS UPON DEFAULT </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights and Remedies Generally </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proceeds </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of the Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Recourse </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses; Attorneys&#146; Fees </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application of Proceeds </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Duties Regarding Preservation of Collateral </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Claims </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px">6.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discontinuance of Proceedings </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" nowrap><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VII</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">7.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">7.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnity Obligations Secured by Collateral; Survival </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" nowrap><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VIII</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MISCELLANEOUS </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Remedies Cumulative </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination; Release </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marshalling </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severability </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filing </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENTIRE AGREEMENT </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GOVERNING LAW </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px">8.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">JURISDICTION AND VENUE </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED</B></U><BR>
<U><B>SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
<B>AMENDED AND RESTATED SECURITY AGREEMENT </B>(this &#147;<U>Agreement</U>&#148;), dated as of December
28, 2006, is by and between <B>PRIMEENERGY CORPORATION, </B>a
Delaware corporation (&#147;<U>PEC</U>&#148;), <B>PRIMEENERGY
MANAGEMENT CORPORATION, </B>a New York corporation, <B>PRIME OPERATING COMPANY, </B>a Texas corporation,
<B>EASTERN OIL WELL SERVICE COMPANY, </B>a West Virginia corporation, <B>SOUTHWEST OILFIELD CONSTRUCTION
COMPANY, </B>an Oklahoma corporation, and <B>EOWS MIDLAND COMPANY, </B>a Texas corporation (collectively, the
&#147;<U>Debtor</U>&#148;), and <B>GUARANTY BANK, FSB, </B>a federal savings bank, as Agent for the benefit of the
Lenders (&#147;<U>Secured Party</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>W I T N E S S E T H:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit Agreement
dated December&nbsp;28, 2006, by and among Debtor, et al., and the Secured Party and the Lenders
signatory thereto (as amended, restated, or supplemented from time to time, the &#147;<U>Credit
Agreement</U>&#148;), the Secured Party and the Lenders have agreed to extend credit to or for the
benefit of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Debtor and the Secured Party entered into a Security Agreement dated as of
February&nbsp;3, 2003, and the parties hereto desire to amend and restate such Security Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party and the
Lenders to extend credit to or for the benefit of the Debtor pursuant to the Credit Agreement,
Debtor has agreed to execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE I</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1
<U>Terms Defined Above</U>. As used herein, each of the terms &#147;<U>Agreement</U>,&#148;
<U>&#147;Credit Agreement</U>,&#148; &#147;<U>Debtor,</U>&#148; and &#147;<U>Secured Party</U>&#148; shall have the meaning
assigned to such term hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used herein, each of the following terms shall have
the following meanings:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Equipment</U>&#148; shall mean all of Debtor&#146;s equipment, as defined in
Section&nbsp;9.102(a)(33) of the UCC, in any form, whether now owned or hereinafter
acquired and wherever located including all parts thereof and all accessories or
additions thereto, whether now owned or hereafter acquired.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnitees</U>&#148; shall mean the Secured Party and its shareholders,
officers, directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeds</U>&#148; shall mean proceeds (as such term is defined in Section
9-306(a)of the UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</U>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>UCC</U>&#148; shall mean the Uniform Commercial Code as in effect from time to
time in the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148; &#147;hereinafter,&#148;
&#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular Article, Section, or provision of this
Agreement. References in this Agreement to Articles, Sections, or Exhibits are to such Articles,
Sections, or Exhibits of this Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined
in the singular or plural shall be equally applicable to the plural or singular, as the case may
be, unless otherwise indicated.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>ARTICLE II</U></B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GRANT OF SECURITY INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the &#147;<U>Collateral</U>&#148;):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Equipment; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing, and all
Proceeds and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE III</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>Validity, Perfection and Priority</U>. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as &#147;debtor&#148; and the Secured
Party as &#147;secured party&#148; and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to which a security
interest can be perfected by the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and
clear of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to cover any of
the Collateral is on file in any public office other than (i)&nbsp;financing statements in favor of the
Secured Party, (ii)&nbsp;financing statements for which proper termination statements have been
delivered to the Secured Party for filing, and (iii)&nbsp;financing statements filed in connection with
Permitted Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Location of Debtor</U>. The chief executive office of Debtor is located at One
Landmark Square, Stamford, Connecticut 06901.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Tradenames; Prior Names</U>. Debtor has not conducted business under any name other
than its current name during the last five years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IV</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of this
Agreement:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Further Assurances</U>. At any time and from time to time, upon the request of
the Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney, and other
documents, make such filings, give such notices, and take such further action as the Secured Party
may reasonably deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the filing of financing statements, in form acceptable to the Secured Party
under the Uniform Commercial Code in effect in any jurisdiction with respect to the
liens and security interests granted hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the performance of all searches of public records deemed necessary by the
Secured Party to establish and determine the priority of the security interests of
the Secured Party or to determine the presence or priority of other secured parties;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the furnishing to the Secured Party from time to time of reports and
schedules in connection with the Collateral as required pursuant to the Credit
Agreement, all in reasonable detail and in form reasonably satisfactory to the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Change of Chief Executive Office</U>. Debtor will not move its chief executive office
except to such new location as Debtor may establish in accordance with the last sentence of this
Section. Debtor shall not establish a new location for its chief executive office or such
activities (or move any such activities from the locations referred to in Section&nbsp;3.3) until it
shall have given to the Secured Party not less than ten days&#146; prior written notice of its
intention to do so, clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Change of Name or Corporate Structure</U>. Debtor shall not change its name or
corporate structure or conduct business under any name other than its current name without giving
notice thereof to the Secured Party within ten days thereafter, clearly describing such new name,
or corporate structure or such new tradename and providing such other information in connection
therewith as the Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor shall take all
such action as the Secured Party may reasonably request to maintain the security interest of the
Secured Party in the Collateral granted hereby at all times fully perfected with the same or
better priority and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
<U>Title, Prohibited Liens and Filings</U>. Debtor agrees to protect the title to the
Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer a Lien to exist
on any of the Collateral (other than in favor of the Secured Party) or sell, assign or otherwise
transfer any of the Collateral to or in favor of any Person other than the Secured Party without
the Secured Party&#146;s written consent. Debtor will not file or permit to be filed or recorded any
financing statement or other security instrument with respect to the Collateral other than in
favor of Secured Party.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Possession of Collateral</U>. The Collateral shall remain in Debtor&#146;s possession
or control at all times at Debtor&#146;s risk of loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Inspection of Collateral</U>. Secured Party may from time to time, open request,
inspect the Equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
<U>Financing Statement Filings; Notifications</U>. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section&nbsp;3.3 hereof, and (b)&nbsp;immediately notify Secured
Party of any change in Debtor&#146;s name. In any notice furnished pursuant to this Section, Debtor
will expressly state that the notice is required by this Agreement and contains facts that will or
may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE V</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time in the discretion
of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of
the foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor,
without notice to or assent by the Debtor, to do the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of any Collateral, at any time when any Event of Default shall
have occurred and be continuing, in the name of Debtor or its own name, or
otherwise, to take possession of and indorse and collect any checks, drafts, notes,
acceptances, or other instruments for the payment of moneys due under, or with
respect to, any Collateral; in the name of Debtor or otherwise to direct any party
liable for any payment under any of the Collateral to make payment of any and all
moneys due or to become due thereunder directly to the Secured Party or as the
Secured Party shall direct; to ask or demand for, collect, receive payment of, and
receipt for, any and all moneys, claims, and other amounts due or to become due at
any time in respect of or arising out of any Collateral;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) at any time when an Event of Default shall have occurred and be continuing,
to prepare, sign, and file financing statements and amendments thereto in the name
of Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) at any time when an Event of Default shall have occurred and be continuing,
to take or cause to be taken all actions necessary to perform or comply or cause
performance or compliance with the terms of this Agreement, including, without
limitation, actions to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or obtain any insurance
called for by the terms of this Agreement, and to pay all or any part of the
premiums therefor and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) upon the occurrence and during the continuance of any Event of Default, (i)
to sign and indorse any invoices, freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtor, assignments, verifications, notices,
and other documents in connection with any of the Collateral, (ii)&nbsp;to commence and
prosecute any suits, actions, or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral, (iii)&nbsp;to defend any suit,
action, or proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to
settle, compromise, or adjust any suit, action, or proceeding described in the
preceding clause and, in connection therewith, to give such discharges or releases as
the Secured Party may deem appropriate, and (v)&nbsp;generally, to sell or transfer and
make any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the option of the Secured Party and the expense of
Debtor, at any time, or from time to time, all acts and things which the Secured
Party deems necessary to protect, preserve, or realize upon the Collateral and the
Liens of the Secured Party thereon and to effect the intent of this Agreement, all as
fully and effectively as Debtor might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) at any time when an Event of Default shall have occurred and be continuing,
to execute, in connection with any foreclosure, any endorsements, assignments, or
other instruments of conveyance or transfer with respect to the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. This power of attorney is a power coupled with an interest and shall be irrevocable so long
as any Obligation remains outstanding or any Commitment exists. Debtor hereby acknowledges and
agrees that in acting pursuant to this power-of-attorney the Secured Party shall be acting in its
own interest and shall have no fiduciary duties to the Debtor, and Debtor hereby waives any claims
to the rights of a beneficiary of a fiduciary relationship hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 6 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall be accountable only for amounts that it actually receives as a result of the exercise of such
powers, and, except for its own gross negligence, neither it nor any of its officers, directors,
employees, or agents shall be responsible to the Debtor for any act or failure to act hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>ARTICLE VI</U></B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U>REMEDIES; RIGHTS UPON DEFAULT</U></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or elsewhere
in this Agreement or in any other Loan Document or other agreement shall be deemed to in any way
limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Proceeds</U>. If an Event of Default shall occur and be continuing (a)&nbsp;all Proceeds
received by Debtor consisting of cash, checks, and other near-cash items shall be held by Debtor
in trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds
received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section&nbsp;6.8 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Disposition of Collateral</U>. If an Event of Default shall occur and be continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Secured Party may direct Debtor to sell, assign, or otherwise liquidate
or dispose of all or from time to time any portion of the Collateral, and Debtor
shall do so, and the Secured Party may take possession of the Proceeds of such
Collateral. The Secured Party may direct Debtor to direct that all Proceeds of such
Collateral be paid directly to the Secured Party or may permit the Proceeds of such
Collateral to be paid to Debtor and all such Proceeds consisting of cash, checks, or
near-cash items shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor in a separate deposit account containing only Proceeds
and shall forthwith upon receipt by Debtor, be turned over to the Secured Party, in
the same form received by Debtor (appropriately indorsed or assigned by Debtor to
the order of the Secured Party or in such other manner as shall be satisfactory to
the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any and all such Proceeds received by the Secured Party (whether from
Debtor or otherwise), shall be applied by the Secured Party as provided in Section
7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Possession of Collateral</U>. If an Event of Default shall occur and be continuing,
(a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral or any part thereof, from Debtor or any other Person which then has possession of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any part thereof with or without notice or judicial process, and for that purpose may enter upon
Debtor&#146;s premises where any of the Collateral is located and remove the same and may make
reasonable use in connection with such removal of any and all services, supplies, aids, and other
facilities of Debtor, and (b)&nbsp;upon three days&#146; notice to Debtor, Debtor shall, at its own expense,
assemble the Collateral, and make it available to the Secured Party by delivery to the Secured
Party at any location designated by the Secured Party which is reasonably convenient to both
parties, whether at the premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its
sole expense, store and keep any Collateral so assembled at such place or places pending further
action by the Secured Party and while the Collateral shall be so stored and kept, provide such
guards and maintenance services as shall be reasonably necessary to protect the same and to
preserve and maintain the Collateral in good condition. Debtor&#146;s obligation to so assemble and
deliver the Collateral is of the essence of this Agreement and, accordingly, upon application to a
court of equity having jurisdiction, the Secured Party shall be entitled to a decree requiring
specific performance by the Debtor of such obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such
terms and conditions and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral may be sold,
leased, assigned, or options or contracts entered to do so, or otherwise disposed of, in the
condition in which the same existed when taken by the Secured Party or after any overhaul or
repair which may be commercially reasonable. Any such disposition which shall be a private sale or
other private proceeding shall be made upon not less than ten days&#146; written notice to Debtor
specifying the time after which such disposition is to be made and the intended sale price or
other consideration therefor. Any such disposition which shall be a public sale shall be made upon
not less than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially reasonable notice of such
auction. To the extent permitted by applicable law, the Secured Party may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to Debtor (except to the extent of surplus money received) as provided
below. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to
have credit on account of the purchase price thereof of amounts owing to such purchaser on account
of any of the Secured Obligations and any such purchaser may deliver notes, claims for interest,
or claims for other payment with respect to such Secured Obligations in lieu of cash up to the
amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such
notes, if the amount payable hereunder shall be less than the amount due thereon, shall be
returned to the holder thereof after being appropriately stamped to
show partial payment. Notwithstanding the foregoing, if the Collateral or any portion thereof is
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">perishable or threatens to decline speedily in value or is of a type customarily sold in a
recognized market only such notice as shall be reasonably practicable shall be required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7
<U>Expenses; Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys&#146; fees and legal expenses incurred by the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Application of Proceeds</U>. The proceeds of any disposition of Collateral shall be
applied as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>first, </I>to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Agent in its
capacity as such;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>second, </I>pro rata to payment or reimbursement of that portion of the
Obligations constituting fees, expenses and indemnities payable to the
Lenders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>third, </I>pro rata to payment of accrued interest on the Loans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>fourth, </I>pro rata to payment of principal outstanding on the Loans and
Obligations owed to any Lender or affiliate of any Lender under any Commodity
Hedge Agreement or Rate Management Transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>fifth, </I>pro rata to any other Obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>sixth, </I>to serve as cash collateral to be held by the Agent to secure
the LC Exposure; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>seventh, </I>any excess, after all of the Obligations shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as
otherwise required by any Governmental Authority.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 <U>Limitation on Duties Regarding Preservation of Collateral</U>. The Secured Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting gross negligence, neither the Secured Party nor any of
its directors, officers, employees, or agents shall be liable for failure to demand, collect, or
realize upon all or any part of the Collateral or for any delay in doing so or shall be under any
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 9 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor or
otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10 <U>Waiver of Claims</U>. Except as otherwise provided in this Agreement, Debtor hereby
waives, to the extent permitted by applicable law, notice of and judicial hearing in connection
with the Secured Party&#146;s taking possession or the Secured Party&#146;s disposition of any of the
Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all damages occasioned by such taking of possession except any damages
which are the direct result of the gross negligence of the Secured Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all other requirements as to the time, place, and terms of sale or other
requirements with respect to the enforcement of the rights of the Secured Party
hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) demand of performance or other demand, notice of intent to demand or
accelerate, notice of acceleration, presentment, protest, advertisement, or notice
of any kind to or upon Debtor or any other Person, except as may be required by the
Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in
order to stay or delay the enforcement of this Agreement, including the absolute
sale of the Collateral or any portion thereof, and Debtor, for itself and all who
may claim under it, insofar as it or they now or hereafter lawfully may, hereby
waives the benefit of all such laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have instituted
any proceeding to enforce any right, power, or remedy under this Agreement by foreclosure, sale,
entry, or otherwise, and such proceeding shall have been discontinued or abandoned for any reason,
then and in every such case, Debtor and the Secured Party shall be returned to their former
positions and rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the Secured Party shall
continue as if no such proceeding had been instituted.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>ARTICLE VII</U></B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U>INDEMNITY</U></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1
<U><B>INDEMNITY</B></U><B>.</B> (a)&nbsp;<B>DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS&#146; FEES AND
EXPENSES) (FOR THE PURPOSES OF</B>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED &#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE
WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR
IN ANY OTHER WAY CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT
LIMITATION, THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE;
PROVIDED THAT NO SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE
EXTENT ARISING FROM THE GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any assertion that could
give rise to an Expense, Debtor shall assume full responsibility for the defense thereof. Without
limiting the application of part (a)&nbsp;of this Section, Debtor agrees to pay or reimburse such
Indemnitee on demand for any and all reasonable fees, costs, and expenses of whatever kind or
nature incurred in connection with the creation, preservation, or protection of the Secured Party&#146;s
Liens on, and security interests in, the Collateral, including, without limitation, all reasonable
fees and taxes in connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable expenses
incurred in the custody, preservation, use, or operation of the Collateral when Collateral is in
the Secured Party&#146;s possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured Party&#146;s interest
therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits, or proceedings arising out of or relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor agrees to
pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or
delivered pursuant to or in connection with this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2
<U>Indemnity Obligations Secured by Collateral; Survival</U>. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article&nbsp;VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 11 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VIII</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1
<U>No Waiver; Remedies Cumulative</U>. No failure or delay on the part of the Secured
Party in exercising any right, power, or privilege hereunder and no course of dealing between any
Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. A waiver by the Secured Party of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy
which the Secured Party would otherwise have on any future occasion. The rights and remedies herein
expressly provided are cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights or remedies which
the Secured Party would otherwise have whether by agreement or now or hereafter existing under
applicable law. No notice to or demand on Debtor in any case shall entitle Debtor to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of
the Secured Party to any other or further action in any circumstances without notice or demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2
<U>Termination; Release</U>. When the Secured Obligations have been indefeasibly paid
and performed in full and the Commitment has terminated, this Agreement shall terminate, and the
Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor the
proper instruments (including Uniform Commercial Code termination statements) acknowledging the
termination of this Agreement, and will duly assign, transfer, and deliver to Debtor, without
recourse, representation, or warranty of any kind whatsoever, such of the Collateral as may be in
possession of the Secured Party and has not theretofore been disposed of, applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the
Secured Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Severability</U>. In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed in lieu of the original to the
extent permitted by applicable law.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <U>Notices and Other Communications</U>. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall be in
writing (including by telecopy). Unless otherwise expressly provided herein, any such notice,
request, or communication shall be deemed to have been duly given or made when provided in
accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.
No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification,
discharge, or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 <U><B>ENTIRE AGREEMENT</B></U><B>. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENTS,
WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT HEREOF. FURTHERMORE,
IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE
FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG SUCH PARTIES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 <U><B>GOVERNING LAW</B></U><B>. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAWS).</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 <U><B>JURISDICTION AND VENUE</B></U><B>. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING
DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT TO WHICH ANY DEBTOR IS A PARTY MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION
OF THE SECURED PARTY, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR HEREBY
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR
VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE SECURED PARTY IN ACCORDANCE WITH THIS SECTION.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement is executed as of the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B><U>DEBTOR</U></B><B>:</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>PRIMEENERGY CORPORATION <BR>
PRIMEENERGY MANAGEMENT<BR>
CORPORATION, PRIME OPERATING <BR>
COMPANY, EASTERN OIL WELL SERVICE <BR>
COMPANY, SOUTHWEST OIL FIELD<BR>
CONSTRUCTION COMPANY <BR>
EOWS MIDLAND COMPANY</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A<I>. </I>Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Beverly A<I>. </I>Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Treasurer, and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 14 -<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B><U>SECURED PARTY</U>:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>GUARANTY BANK, FSB, </B>as Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ David M. Butler</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">David M. Butler</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT A</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;3.1:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FILING LOCATIONS</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Delaware</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of New York</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Texas</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of West Virginia</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">County Clerk of Oklahoma County, Oklahoma</TD>
</TR>
<TR><TD>&nbsp;</TD></TR><!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->A-i<!-- /Folio -->
</DIV>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.5
<SEQUENCE>8
<FILENAME>d44173exv10w23w5.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.23.5
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BETWEEN</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EASTERN OIL WELL SERVICE COMPANY<BR>
EOWS MIDLAND COMPANY<BR>
(DEBTOR)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AND</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GUARANTY BANK, FSB, AS AGENT<BR>
(SECURED PARTY)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DECEMBER 28, 2006</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><U><B>Page</B></U></TD>
    <TD>&nbsp;</TD>
</TR>

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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE I DEFINITIONS AND INTERPRETATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.1 Terms Defined Above</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2 Terms Defined in Credit Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3 Additional Defined Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.4 Undefined Financial Accounting Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5 References</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.6 Articles and Sections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.7 Number and Gender</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE II GRANT OF SECURITY INTEREST</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE III REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1 Validity, Perfection and Priority</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2 No Liens; Other Financing Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3 Location of Debtor and Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.4 Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.5 Tradenames; Prior Names</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IV COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1 Further Assurances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2 Change of Chief Executive Office</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3 Change of Name or Corporate Structure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4 Title, Prohibited Liens and Filings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5 Maintain Records and Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.6 Right of Inspection</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.7 Possession of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.8 Financing Statement Filings; Notifications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE V ACCOUNTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1 Debtor Remains Liable under Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2 Collections on Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VI POWER OF ATTORNEY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1 Appointment as Attorney-in-Fact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2 No Duty on the Part of Secured Party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VII REMEDIES; RIGHTS UPON DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1 Rights and Remedies Generally</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2 Proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3 Collection of Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4 Disposition of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.5 Debtor&#146;s Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.6 Possession of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><U><B>Page</B></U></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.7 Disposition of the Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.8 Recourse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.9 Expenses; Attorneys&#146; Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.10 Application of Proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.11 Limitation on Duties Regarding Preservation of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.12 Waiver of Claims</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.13 Discontinuance of Proceedings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VIII INDEMNITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.1 INDEMNITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.2 Indemnity Obligations Secured by Collateral; Survival</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IX MISCELLANEOUS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.1 No Waiver; Remedies Cumulative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.2 Termination; Release</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.3 Counterparts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.4 Marshalling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.5 Severability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.6 Financing Statement Filing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.7 Notices and Other Communications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.8 Parties in Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.9 Amendments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.10 Entire Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.11 Governing Law</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.12 Jurisdiction and Venue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED</B></U><BR>
<U><B>SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <B>AMENDED AND RESTATED SECURITY AGREEMENT </B>(this &#147;<U>Agreement</U>&#148;), dated as of
December&nbsp;28, 2006, is by and between <B>EOWS MIDLAND COMPANY, </B>a Texas corporation <B>EASTERN
OIL WELL SERVICE COMPANY, </B>a West Virginia Corporation (collectively the
&#147;<U>Debtor&#146;</U>&#148;) and <B>GUARANTY BANK, FSB, </B>a federal savings bank as Agent for the
benefit of the Lenders (&#147;<U>Secured Party</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>W I
T N E S S E T H:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December&nbsp;28, 2006, by and among Debtor and the Secured Party and the
Lenders signatory thereto (as amended, restated, or supplemented from time to time, the
<U>&#147;Credit Agreement</U>&#148;), the Secured Party and the Lenders have agreed
to extend credit to or for the benefit of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Debtor and the Secured Party entered into a Security Agreement dated
as of December&nbsp;28, 2006, and the parties hereto desire to amend and restate such
Security Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party
to extend credit to or for the benefit of the Debtor pursuant to the Credit Agreement,
Debtor has agreed to execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above</U>. As used herein, each of the terms
&#147;<U>Agreement,</U>&#148; <U>&#147;Credit Agreement,</U>&#148; <U>&#147;Debtor,</U>&#148; and <U>&#147;Secured
Party&#148;</U> shall have the meaning assigned to such term hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used herein, each of the following terms
shall have the following meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Accounts</U>&#148; shall mean all accounts receivable, book debts,
notes, drafts, instruments, documents, acceptances, and other forms of
obligations now owned or hereafter received or acquired by or belonging or
owing to Debtor (including, without limitation, under any trade names,
styles, or divisions thereto), whether arising from the sale or lease of
goods or the rendition of services or any other
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">transaction (including, without limitation, any such obligation which
might be characterized as an account, general intangible, other than contract
rights under contracts containing prohibitions against assignment of or the
granting of a security interest in the rights of a party thereunder, or chattel
paper under the Uniform Commercial Code in effect in any jurisdiction), and all
rights of Debtor in, to, and under all purchase orders now owned or hereafter
received or acquired by it for goods or services, and all rights of Debtor to any
goods the sale or lease of which gave rise to any of the foregoing (including,
without limitation, returned or repossessed goods and rights of unpaid sellers),
and all moneys due or to become due to Debtor under all contracts for the sale or
lease of goods or the performance of services (whether or not earned by
performance) or in connection with any other transaction, now in existence or
hereafter arising, including, without limitation, all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; shall mean each Person obligated on an Account,
Chattel Paper, or General Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Records</U>&#148; shall mean (a)&nbsp;all original copies of all
documents, instruments, or other writings evidencing the Accounts, (b)&nbsp;all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to the Accounts, including, without
limitation, all tapes, cards, computer tapes, computer discs, computer runs,
record keeping systems, and other papers and documents relating to the Accounts,
whether in the possession or under the control of Debtor or any computer bureau
or agent from time to time acting for or on behalf of Debtor or otherwise, (c)
all evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements, or other
modifications thereto, notices to other creditors or secured parties, and
certificates, acknowledgements, or other writings, including, without
limitation, lien search reports, from filing or other registration offices, (d)
all credit information, reports, and memoranda relating thereto, and (e)&nbsp;all
other written or non written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Chattel Paper</U>&#148; shall mean all chattel paper (as such term is
defined in Section&nbsp;9 105(a)(2) of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&#147;Equipment</U>&#148; shall mean all of Debtor&#146;s equipment (including, but
not limited to that described on Exhibit&nbsp;B attached hereto), as defined in
Section&nbsp;9.102(a)(33) of the UCC, in any form, whether now owned or hereinafter
acquired and wherever located including all parts thereof and all accessories or
additions thereto, whether now owned or hereafter acquired.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General Intangibles&#148;</U> shall mean all general intangibles (as such
term is defined in Section&nbsp;9 106 of the UCC) of Debtor, including, without
limitation,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">rights to the payment of money (other than Accounts), net profit interests,
contracts, farmout agreements, licenses, and franchises (excluding licenses
and franchises which prohibit the assignment or grant of a security
interest by Debtor), federal income tax refunds, trade names, distributions
on certificated securities (as defined in &#167;8 102(a)(1) of the UCC) and
uncertificated securities (as defined in &#167;8 102(a)(2) of the UCC), computer
programs and other computer software, inventions, designs, trade secrets,
goodwill, proprietary rights, customer lists, supplier contracts, sale
orders, correspondence, advertising materials, payments due in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of
any property, reversionary interests in pension and profit sharing plans
and reversionary, beneficial and residual interests in trusts, credits with
and other claims against any Person, together with any collateral for any
of the foregoing and the rights under any security agreement granting a
security interest in such collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnitees</U>&#148; shall mean the Secured Party and its shareholders,
officers, directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeds</U>&#148; shall mean proceeds (as such term is defined in
Section&nbsp;9 306(a) of the UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</U>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>UCC</U>&#148; shall mean the Uniform Commercial Code as in effect from
time to time in the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial accounting
terms used in this Agreement shall have the meanings assigned to such terms according to
GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148; &#147;hereinafter,&#148;
&#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular Article,
Section, or provision of this Agreement. References in this Agreement to Articles,
Sections, or Exhibits are to such Articles, Sections, or Exhibits of this Agreement
unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Articles and Sections</U>. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and other legal
relations of the parties hereto shall be determined from this instrument as an entirety
and without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to such Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Number and Gender</U>. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise, the plural
shall be understood to include the singular. Words denoting sex shall be construed to
include the masculine, feminine and neuter, when such construction is appropriate; and
specific enumeration shall not exclude the general but shall be construed as cumulative.
Definitions of terms defined
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in the singular or plural shall be equally applicable to the plural or singular,
as the case may be, unless otherwise indicated.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GRANT OF SECURITY INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all
Secured Obligations, Debtor hereby assigns and transfers for the purpose of security and
pledges to the Secured Party and grants to the Secured Party a security interest in and
continuing lien on all right, title, and interest of Debtor in, to, and under the
following, in each case, whether now owned or existing or hereafter acquired or arising,
and wherever located (all of which is herein collectively called the
&#147;<U>Collateral</U>&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Equipment;</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>
all General Intangibles; and</TD>
</TR>




<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or
all of the foregoing, all substitutions and replacements for
any or all of the foregoing, and all Proceeds and products of
any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations
and warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Validity, Perfection and Priority</U>. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and continuing
security interests in the Collateral. Upon the filing of financing statements, naming
Debtor as &#147;debtor&#148; and the Secured Party as &#147;secured party&#148; and describing the
Collateral, in the filing offices set forth on Exhibit&nbsp;A, the security interests granted
to the Secured Party hereunder will constitute valid first-priority perfected security
interests in all Collateral with respect to which a security interest can be perfected by
the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted to
the Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral
free and clear of any and all Liens, rights, or claims of all other Persons, and Debtor
shall defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Secured Party.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting
to cover any of the Collateral is on file in any public office other than (i)&nbsp;financing
statements in favor of the Secured Party, (ii)&nbsp;financing statements for which proper
termination statements have been delivered to the Secured Party for filing, and (iii)
financing statements filed in connection with Permitted Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Location of Debtor and Collateral</U>. The chief executive office of Debtor
is located at One Landmark Square, Stamford, Connecticut 06901. The primary copies of the
Account Records are located at, and all Accounts and General Intangibles are maintained
at, and controlled and directed (including, without limitation, for general accounting
purposes) from, such chief executive office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Accounts</U>. (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material respects,
the genuine, legal, valid, and binding obligation of the Account Debtor in respect
thereof, representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is and will
be, in all material respects, enforceable in accordance with its terms, (iii)&nbsp;is not and
will not be subject to any setoffs, defenses, taxes, counterclaims (except (A)&nbsp;with
respect to refunds, returns, and allowances in the ordinary course of business, and (B)
to the extent that such Account may not yet have been earned by performance), and (iv)&nbsp;is
and will be, in all material respects, in compliance with all applicable laws, whether
federal, state, local, or foreign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Accounts which are evidenced by Chattel Paper require the consent of the
Account Debtor in respect thereof in connection with their assignment hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>Tradenames; Prior Names</U>. Debtor has not conducted business under any
name other than its current name during the last five years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Further Assurances</U>. At any time and from time to time, upon the request
of the Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly
execute and deliver any and all such further instruments, endorsements, powers of
attorney, and other documents, make such filings, give such notices, and take such
further action as the Secured Party may reasonably deem desirable in obtaining the full
benefits of this Agreement and the rights, remedies, and powers herein granted,
including, without limitation, the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the filing of financing statements, in form acceptable to the Secured Party
under the Uniform Commercial Code in effect in any jurisdiction with respect to the liens
and security interests granted hereby;
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the performance of all searches of public records deemed necessary by the
Secured Party to establish and determine the priority of the security interests of the
Secured Party or to determine the presence or priority of other secured parties; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the furnishing to the Secured Party from time to time of reports and schedules
in connection with the Collateral as required pursuant to the Credit Agreement, all in
reasonable detail and in form reasonably satisfactory to the Secured Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Change of Chief Executive Office</U>. Debtor will not move its chief
executive office except to such new location as Debtor may establish in accordance with
the last sentence of this Section. The originals of all Account Records and General
Intangibles will be kept at such chief executive office or at the locations referred to in
Section&nbsp;3.3, or at such new locations as Debtor may establish in accordance with the last
sentence of this Section. All Accounts, Account Records, and General Intangibles of Debtor
will be maintained at and controlled and directed (including, without limitation, for
general accounting purposes) from the locations referred to in Section&nbsp;3.3 or such new
locations as the Debtor may establish in accordance with the last sentence of this
Section. With respect to any new location, promptly upon the request of the Secured Party,
Debtor shall take all such action as the Secured Party may request to maintain the
security interest of the Secured Party in the Collateral granted hereby at all times fully
perfected with the same or better priority and in full force and effect. Debtor shall not
establish a new location for its chief executive office or such activities (or move any
such activities from the locations referred to in Section&nbsp;3.3) until it shall have given
to the Secured Party not less than ten days&#146; prior written notice of its intention to do
so, clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Change of Name or Corporate Structure</U>. Debtor shall not change its name
or corporate structure or conduct business under any name other than its current name
without giving notice thereof to the Secured Party within ten days thereafter, clearly
describing such new name, or corporate structure or such new tradename and providing such
other information in connection therewith as the Secured Party may reasonably request.
With respect to such new name, corporate structure, or tradename, promptly upon the
request of the Secured Party, Debtor shall take all such action as the Secured Party may
reasonably request to maintain the security interest of the Secured Party in the
Collateral granted hereby at all times fully perfected with the same or better priority
and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Title, Prohibited Liens and Filings</U>. Debtor agrees to protect the title
to the Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer
a Lien to exist on any of the Collateral (other than in favor of the Secured Party) or
sell, assign or otherwise transfer any of the Collateral to or in favor of any Person
other than the Secured Party without the Secured Party&#146;s written consent. Debtor will not
file or permit to be filed or recorded any financing statement or other security
instrument with respect to the Collateral other than in favor of Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause
to be kept and maintained, at its own cost and expense satisfactory and complete records
of the Collateral, including, but not limited to, the originals of all documentation with
respect to all
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts and General Intangibles and records of all payments received and all
credits granted on the Accounts, all merchandise returned, and all other dealings
therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to
Debtor have full and free access during normal business hours of Debtor to all the
books, correspondence, and records and Equipment of Debtor; and the Secured Party and
its representatives may examine the same, take extracts therefrom, and make photocopies
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Possession of Collateral</U>. The Collateral shall remain in Debtor&#146;s
possession or control at all times at Debtor&#146;s risk of loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Financing Statement Filings; Notifications</U>. Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed with the
offices of the Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will
immediately notify the Secured Party of any condition or event that may change the
proper location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a security interest in the Collateral. Without
limiting the generality of the foregoing, Debtor will (a)&nbsp;notify the Secured Party
within a reasonable period of time in advance of any change to a jurisdiction other than
as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief place of
business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning
the Accounts and the General Intangibles and the original of all the Accounts Records,
or (iii)&nbsp;in the &#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC,
and (b)&nbsp;immediately notify Secured Party of any change in Debtor&#146;s name. In any notice
furnished pursuant to this Section, Debtor will expressly state that the notice is
required by this Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ACCOUNTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured
Party), Debtor shall remain liable under each of the Accounts to observe and perform all
the conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account. The Secured
Party shall have no obligation or liability under any Account (or any agreement giving
rise thereto) by reason of or arising out of this Agreement or the receipt by the
Secured Party of any payment relating to such Account pursuant hereto, nor shall the
Secured Party be obligated in any manner to perform any of the obligations of Debtor
under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action to
enforce any performance, or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Collections on Accounts</U>. Prior to the occurrence of an Event of
Default, the Secured Party hereby authorizes Debtor to collect the Accounts. At any time
following and during the continuance of any Event of Default, the Secured Party may
curtail or terminate said authority at any time and itself, or by its agents, collect all
Accounts, and any payments of Accounts collected by Debtor shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor. All Proceeds, while
held by the Secured Party (or by Debtor in trust for the Secured Party) shall continue to
be Collateral securing all of the Secured Obligations and shall not constitute payment
thereof until applied as hereinafter provided.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes
and appoints the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact, with full irrevocable power and
authority in the place and stead of Debtor and in the name of Debtor or in its own name,
from time to time in the discretion of the Secured Party, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the foregoing,
Debtor hereby gives the Secured Party the power and right, on behalf of Debtor, without
notice to or assent by the Debtor, to do the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;in the case of any Account, at any time when the authority of Debtor to collect
the Accounts has been curtailed or terminated pursuant hereto, or in the case of any
other Collateral, at any time when any Event of Default shall have occurred and be
continuing, in the name of Debtor or its own name, or otherwise, to take possession of
and indorse and collect any checks, drafts, notes, acceptances, or other instruments for
the payment of moneys due under, or with respect to, any Collateral; in the name of
Debtor or otherwise to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand
for, collect, receive payment of, and receipt for, any and all moneys, claims, and other
amounts due or to become due at any time in respect of or arising out of any Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to
prepare, sign, and file financing statements and amendments thereto in the name of
Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to
take or cause to be taken all actions necessary to perform or comply or cause
performance or compliance with the terms of this Agreement, including, without
limitation, actions to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or obtain any insurance called
for by the terms of this Agreement, and to pay all or any part of the premiums therefor
and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;upon the occurrence and during the continuance of any Event of Default, (i)&nbsp;to
sign and indorse any invoices, freight or express bills, bills of lading, storage or
warehouse
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">receipts, drafts against debtor, assignments, verifications, notices, and other documents in
connection with any of the Collateral, (ii)&nbsp;to commence and prosecute any suits, actions, or
proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral, (iii)&nbsp;to defend
any suit, action, or proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to
settle, compromise, or adjust any suit, action, or proceeding described in the preceding clause
and, in connection therewith, to give such discharges or releases as the Secured Party may deem
appropriate, and (v)&nbsp;generally, to sell or transfer and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the Secured Party were
the absolute owner thereof for all purposes, and to do, at the option of the Secured Party and the
expense of Debtor, at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve, or realize upon the Collateral and the Liens of the Secured
Party thereon and to effect the intent of this Agreement, all as fully and effectively as Debtor
might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to execute,
in connection with any foreclosure, any endorsements, assignments, or other instruments of
conveyance or transfer with respect to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or
failure to act hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REMEDIES; RIGHTS UPON DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a
secured
party under the UCC, all rights now or hereafter existing under all other applicable laws,
and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth
in this
Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed
to in any way limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <u>Proceeds</u>. If an Event of Default shall occur and be continuing, in addition to the
rights of the Secured Party specified with respect to the payment of Accounts, (a)&nbsp;all
Proceeds
received by Debtor consisting of cash, checks, and other near cash items shall be held by
Debtor
in trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith
upon
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">receipt by Debtor, be turned over to the Secured Party, in the same form received
by Debtor (appropriately indorsed or assigned by the Debtor to the order of the Secured
Party or in such other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any
and all such Proceeds received by the Secured Party (whether from Debtor or otherwise),
or any part thereof, shall be applied by the Secured Party as provided in Section&nbsp;7.10
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Collection of Accounts</U>. If an Event of Default shall occur and be
continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may instruct the obligor or obligors on any obligation owing
or purporting to be owed to Debtor constituting the Collateral (including, without
limitation, the Accounts) to make any payment required by the terms of such obligation
directly to the Secured Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the Secured Party shall have the right from time to time to modify (including,
without limitation, to extend the time for payment or arrange for payment in
installments) or waive rights under any such obligation and to compromise or settle
counterclaims or setoffs with the obligor under any such obligation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any and all of such proceeds of such collections paid to the Secured Party, or
any part thereof, (after deduction of the Secured Party&#146;s expenses of collection,
including, without limitation, reasonable attorneys&#146; fees and disbursements), shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Disposition of Collateral</U>. If an Event of Default shall occur and be
continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may direct Debtor to sell, assign, or otherwise liquidate or
dispose of all or from time to time any portion of the Collateral, and Debtor shall do
so, and the Secured Party may take possession of the Proceeds of such Collateral. The
Secured Party may direct Debtor to direct that all Proceeds of such Collateral be paid
directly to the Secured Party or may permit the Proceeds of such Collateral to be paid
to Debtor and all such Proceeds consisting of cash, checks, or near cash items shall be
held by Debtor in trust for the Secured Party, segregated from other funds of Debtor in
a separate deposit account containing only Proceeds and shall forthwith upon receipt by
Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by Debtor to the order of the Secured Party or in
such other manner as shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any and all such Proceeds received by the Secured Party (whether from Debtor or
otherwise), shall be applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts</U>. If an Event of Default shall occur and be continuing,
the Secured Party may liquidate any securities held in any accounts of Debtor and apply
the proceeds thereof and any other amounts held in any accounts of Debtor as provided in
Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral</U>. If an Event of Default shall occur and be
continuing, (a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately
retake possession of the Collateral (including the originals of all or any Accounts and
Account Records) or any part
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">thereof, from Debtor or any other Person which then has possession of any part thereof
with or without notice or judicial process, and for that purpose may enter upon Debtor&#146;s
premises where any of the Collateral is located and remove the same and may make
reasonable use in connection with such removal of any and all services, supplies, aids,
and other facilities of Debtor, and (b)&nbsp;upon three days&#146; notice to Debtor, Debtor shall,
at its own expense, assemble the Collateral, including, without limitation, the originals
of all Account Records (or from time to time any portion thereof) and make it available
to the Secured Party by delivery to the Secured Party at any location designated by the
Secured Party which is reasonably convenient to both parties, whether at the premises of
Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store and
keep any Collateral so assembled at such place or places pending further action by the
Secured Party and while the Collateral shall be so stored and kept, provide such guards
and maintenance services as shall be reasonably necessary to protect the same and to
preserve and maintain the Collateral in good condition. Debtor&#146;s obligation to so
assemble and deliver the Collateral is of the essence of this Agreement and, accordingly,
upon application to a court of equity having jurisdiction, the Secured Party shall be
entitled to a decree requiring specific performance by the Debtor of such obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and
be continuing, the Secured Party may sell, assign, lease, give an option or options to
purchase, or otherwise dispose of the Collateral (or contract to do any of the
foregoing) under one or more contracts or as an entirety, and, to the extent permitted
by applicable law, without the necessity of gathering at the place of sale the property
to be sold, at public or private sale or sales, conducted by any officer, nominee or
agent of, or auctioneer or attorney for the Secured Party at any location of any third
party conducting or otherwise involved in such sale or any office of the Secured Party
or elsewhere and in general in such manner, at such time or times and upon such terms
and conditions and at such price as may be commercially reasonable, for cash or on
credit or for future delivery without assumption of any credit risk. Any of the
Collateral may be sold, leased, assigned, or options or contracts entered to do so, or
otherwise disposed of, in the condition in which the same existed when taken by the
Secured Party or after any overhaul or repair which may be commercially reasonable. Any
such disposition which shall be a private sale or other private proceeding shall be made
upon not less than ten days&#146; written notice to Debtor specifying the time after which
such disposition is to be made and the intended sale price or other consideration
therefor. Any such disposition which shall be a public sale shall be made upon not less
than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the
option or the Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law, the
Secured Party may bid for and become the purchaser of the Collateral or any item
thereof, offered for sale in accordance with this Section without accountability to
Debtor (except to the extent of surplus money received) as provided below. In the
payment of the purchase price of the Collateral, the purchaser shall be entitled to have
credit on account of the purchase price thereof of amounts owing to such purchaser on
account of any of the Secured Obligations and any such purchaser may deliver notes,
claims for interest, or claims for other payment with respect to such Secured
Obligations in lieu of cash up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder
shall be less than the amount
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">due thereon, shall be returned to the holder thereof after being appropriately
stamped to show partial payment. Notwithstanding the foregoing, if the Collateral or any
portion thereof is perishable or threatens to decline speedily in value or is of a type
customarily sold in a recognized market only such notice as shall be reasonably
practicable shall be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to satisfy the
Secured Obligations. Debtor shall also be liable for all reasonable expenses of the
Secured Party incurred in connection with collecting such deficiency, including, without
limitation, the reasonable fees and disbursements of any attorneys employed by the
Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses; Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for
all its reasonable expenses in connection with the exercise of its rights and remedies
hereunder, including, without limitation, reasonable attorneys&#146; fees and legal expenses
incurred by the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds</U>. The proceeds of any disposition of Collateral
shall be applied as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <I>first</I>, to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Agent in its capacity as
such;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <I>second</I>, pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <I>third</I>, pro rata to payment of accrued interest on the Loans;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <I>fourth</I>, pro rata to payment of principal outstanding on the Loans and
Obligations owed to any Lender or affiliate of any Lender under any Commodity Hedge
Agreement or Rate Management Transaction;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <I>fifth</I>, pro rata to any other Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <I>sixth</I>, to serve as cash collateral to be held by the Agent to secure the LC
Exposure; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <I>seventh</I>, any excess, after all of the Obligations shall have been indefeasibly
paid in full in cash, shall be paid to the Borrower or as otherwise required by any
Governmental Authority.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral</U>. The Secured
Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the
Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with
it in the same
manner as the Secured Party deals with similar property for its own account. The
Secured Party
shall have no obligation to take any steps to preserve rights against prior parties
to any
Collateral. Except for matters constituting willful misconduct and/or gross
negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be
liable for failure
to demand, collect, or realize upon all or any part of the Collateral or for any
delay in doing so or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall be under any obligation to sell or otherwise dispose of any Collateral upon
the request of the Debtor or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims</U>. Except as otherwise provided in this Agreement,
Debtor
hereby waives, to the extent permitted by applicable law, notice of and judicial
hearing in
connection with the Secured Party&#146;s taking possession or the Secured Party&#146;s
disposition of any
of the Collateral in accordance herewith, including, without limitation, any and
all prior notice
and hearing for any prejudgment remedy or remedies and any such right which the
Debtor would
otherwise have under the constitution or any statute of the United States or any
state, and Debtor
hereby further waives, to the extent permitted by law:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;all damages occasioned by such taking of possession except any damages which
are the direct result of the willful misconduct and/or gross negligence of the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;all other requirements as to the time, place, and terms of sale or other
requirements with respect to the enforcement of the rights of the Secured Party
hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;demand of performance or other demand, notice of intent to demand or
accelerate, notice of acceleration, presentment, protest, advertisement, or notice of
any kind to or upon Debtor or any other Person, except as may be required by the Credit
Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all rights of redemption, appraisement, valuation, diligence, stay, extension,
or moratorium now or hereafter in force under any applicable law in order to stay or
delay the enforcement of this Agreement, including the absolute sale of the Collateral
or any portion thereof, and Debtor, for itself and all who may claim under it, insofar
as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have
instituted
any proceeding to enforce any right, power, or remedy under this Agreement by
foreclosure,
sale, entry, or otherwise, and such proceeding shall have been discontinued or
abandoned for any
reason, then and in every such case, Debtor and the Secured Party shall be returned
to their
former positions and rights hereunder with respect to the Collateral subject to the
security
interest created under this Agreement, and all rights, remedies, and powers of the
Secured Party
shall continue as if no such proceeding had been instituted.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U><B>INDEMNITY</B></U><B>.</B> (a)&nbsp;<B>DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE
INDEMNITEES HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS
(INCLUDING REASONABLE ATTORNEYS&#146; FEES AND EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL
OF THE FOREGOING ARE COLLECTIVELY CALLED &#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE WHICH
MAY BE IMPOSED</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR IN ANY
OTHER WAY CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THE ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE INDEMNIFIED
PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE WILLFUL MISCONDUCT
AND/OR GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any assertion
that could give rise to an Expense, Debtor shall assume full responsibility for the
defense thereof. Without limiting the application of part (a)&nbsp;of this Section, Debtor
agrees to pay or reimburse such Indemnitee on demand for any and all reasonable fees,
costs, and expenses of whatever kind or nature incurred in connection with the creation,
preservation, or protection of the Secured Party&#146;s Liens on, and security interests in,
the Collateral, including, without limitation, all reasonable fees and taxes in
connection with the recording or filing of instruments and documents in public offices,
payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable
expenses incurred in the custody, preservation, use, or operation of the Collateral when
Collateral is in the Secured Party&#146;s possession, and all other reasonable fees, costs,
and expenses in connection with protecting, maintaining, or preserving the Collateral and
the Secured Party&#146;s interest therein, whether through judicial proceedings or otherwise,
or in defending or prosecuting any actions, suits, or proceedings arising out of or
relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor
agrees to pay, indemnify, and hold each Indemnitee harmless from and against any
Expenses which such Indemnitee may suffer, expend, or incur in consequence of or growing
out of any misrepresentation by any Debtor in this Agreement or in any statement or
writing contemplated by or made or delivered pursuant to or in connection with this
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are
unenforceable for any reason, Debtor hereby agrees to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under applicable
law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral; Survival</U>. Any amounts paid
by any Indemnitee as to which such Indemnitee has the right to reimbursement shall
constitute Secured Obligations secured by the Collateral. The indemnity obligations of
the Debtor contained in this Article&nbsp;VIII shall continue in full force and effect
notwithstanding the full payment and performance of the Secured Obligations and the
termination of this Agreement.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>No Waiver; Remedies Cumulative</U>. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no course of
dealing between any Debtor and the Secured Party shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power, or
privilege. A waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Secured Party
would otherwise have on any future occasion. The rights and remedies herein expressly
provided are cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights or
remedies which the Secured Party would otherwise have whether by agreement or now or
hereafter existing under applicable law. No notice to or demand on Debtor in any case
shall entitle Debtor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Secured Party to any other or
further action in any circumstances without notice or demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Termination; Release</U>. When the Secured Obligations have been
indefeasibly paid and performed in full and the Commitment has terminated, this
Agreement shall terminate, and the Secured Party, at the request and sole expense of
Debtor, will execute and deliver to Debtor the proper instruments (including Uniform
Commercial Code termination statements) acknowledging the termination of this Agreement,
and will duly assign, transfer, and deliver to Debtor, without recourse, representation,
or warranty of any kind whatsoever, such of the Collateral as may be in possession of
the Secured Party and has not theretofore been disposed of, applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts</U>. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to
marshall any assets in favor of Debtor or any other Person or against or in payment of
any or all of the Secured Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Severability</U>. In case any provision in or obligation under this
Agreement or the Secured Obligations shall be invalid, illegal, or unenforceable in any
jurisdiction, the validity, legality, and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall not in
any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the
original to the extent permitted by applicable law.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications</U>. Except as to oral notices
expressly authorized herein, all notices, requests, and communications under this
Agreement shall be in writing (including by telecopy). Unless otherwise expressly
provided herein, any such notice, request, or communication shall be deemed to have been
duly given or made when provided in accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to
the benefit of Debtor, the Secured Party, and their respective legal representatives,
successors, and assigns. No other Person shall have any right, benefit, priority, or
interest hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such provisions may be
freely waived in whole or in part by the Secured Party at any time if the Secured Party in
its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the amendment,
supplement, modification, discharge, or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U><B>Entire Agreement</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject hereof and shall supersede any
prior agreements, whether written or oral, between the Parties hereto relating to the
subject hereof. Furthermore, in this regard, this Agreement and the other written Loan
Documents represent, collectively, the final agreement among the Parties hereto and may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements
of such Parties. There are no unwritten oral agreements among such Parties</B>.</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U><B>Governing Law</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>This Agreement shall be governed by and construed in
accordance with the Laws of the State of Texas (without giving effect to principles
thereof relating to conflicts of laws)</B>.</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U><B>Jurisdiction and Venue</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>All actions or proceedings with respect to,
arising directly or indirectly in connection with, out of, related to or from this
Agreement or any other Loan Document to which any Debtor is a Party may be litigated at
the sole discretion and election of the Secured Party, in courts having situs in Dallas,
Dallas County, Texas. Debtor hereby submits to the jurisdiction of any local, state, or
federal court located in Dallas, Dallas County, Texas, and hereby waives any rights it
may have to transfer or change the jurisdiction or venue of any litigation brought
against it by the Secured Party in accordance with this Section.</B></FONT>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>DEBTOR</B></U>:
<BR>
<BR>
<B>EOWS MIDLAND COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings     &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer, and<br>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>SECURED PARTY</B></U>:<BR>
<BR>
<B>GUARANTY BANK, FSB</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David M. Butler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David M. Butler&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT A</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;3.1:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FILING LOCATIONS</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Texas</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of West Virginia</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->A-i <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT B</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DESCRIPTION OF EQUIPMENT</B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1980 WILSON Mogul 42B D/D Drum Back-In Well Service Rig, S/N-10677, (Rig No.&nbsp;2)
LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 9,000&#146; of 9/16&#148; Sandline, Air Clutches,
PARMAC 22SR Hydromatic Brake p/b DETROIT 12V-71N Diesel Engine, S/N-N/A, w/Electric Starter,
Radiator, ALLISON CLBT-5860 Transmission, WILSON 96&#146;H 180,000# Static Hook Load Telescoping
Mast, S/N-N/A, Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing
Board, Triple Rod Basket, All Mounted on WILSON 5-Axle Carrier, VIN-N/A (TX Lic #16P-146),
w/(6) Hydraulic Leveling jacks, KOENIG Hydraulic Utility Winch, Folding Walkways w/Stairs,
Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform, 445/65Rx22.5 Front &#038; 11.00x20
Rear Tires (unit #8617) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93 Hydraulic Tubing Tongs, S/N-1840, w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS Type C-101 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KING OIL TOOLS 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DENCON 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ Mark IV Hydraulic Rod Tongs, S/N-SR3298RR</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL WORKS, INC. (Rebuilt TOTCO) Hydromast Pad-Type Weight Indicator, S/N-2007</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1980 WILSON Mogul 42B Double Drum Back-In Well Service Rig, S/N-10650, (Rig No.&nbsp;3)
ZEBUS f/1&#148; Tubing Line, 575&#146; of 1&#148; Tubing Line, 11,000&#146; of 9/16&#148; Sandline, Air</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-i <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Clutches, PARMAC 122 Hydromatic Brake, S/N-53087, p/b DETROIT 8V-71N Diesel
Engine w/Electric Starter, Radiator, ALLISON CLBT-5860 Transmission, WILSON 96-180
96&#146;H 180,000# Static Hook Load Telescoping Mast, S/N-N/A, Hydraulically Raised &#038;
Scoped, Single 3-Stage Raising Ram, Double Tubing Board, Triple Rod Basket, All
Mounted on WILSON 5-Axle Carrier, VIN-N/A (TX Lic #16P-147), w/(4) Hydraulic
Leveling jacks, (4)&nbsp;Manual Leveling Jacks, KOENIG Hydraulic Utility Winch, Folding
Walkways w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform,
385/65Rx22.5 Front &#038; 10.00Rx20 Rear Tires (unit #8616) together with well service
tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-632, w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS Type TC-101 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>
BJ Mark IV Hydraulic Rod Tongs, S/N-2310</TD>
</TR>




<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>RATIGAN 20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BELL RUBBER BRS 1 Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators </TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6)&nbsp;Snapper-Type Rod Wrenches</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL WORKS, INC. (Rebuilt TOTCO) Hydromast Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1968 SKYTOP 4210 Double Drum Back-In Well Service Rig, S/N-4210-382, (Rig No.&nbsp;4)
LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 13,000&#146; of 9/16&#148; Sandline, Air
Clutches, PARMAC 15&#148; DR Hydromatic Brake p/b DETROIT 8V-71N Diesel Engine,
S/N-8VA794503, w/Electric Starter, Radiator, ALLISON CLBT-4460 Transmission,
SKYTOP 96&#146;H 180,000# Static Hook Load Telescoping Mast, S/N-LXT120, Hydraulically
Raised &#038; Scoped, Single 3 Stage Raising Ram, Double Tubing Board, Triple Rod
Basket, All Mounted on 1968 SKYTOP 4 Axle Carrier, VIN-N/A, w/(4)</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-ii <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Hydraulic Leveling Jacks, Hydraulic Utility Winch, Folding Walkways w/Stairs,
Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform, 385/65Rx22.5 Front &#038;
10.00x20 Rear Tires (Unit #11016) together with well service tools described as
follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 75-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) Rod Clevises</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-436, w/Backup &#038; Lift Cylinders w/(2)
Sets 4 1/2&#148; Backup Dies, (1)5 1/2&#148; Drag Ring &#038; Top Plate, Extra Sets of 2 3/8&#148; to
4 1/2&#148; Heads</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS TB-101 Air Tubing Slips w/2-3/8&#148;, 2-7/8&#148;, 4-1/2&#148; &#038; 5-1/2&#148; Inserts</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CARTER TOOL CO. Hydraulic Rod Tongs, S/N-N/A</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators, (2)&nbsp;1.25&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches, (2)&nbsp;1.25&#148; Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 220,000# Weight Indicator (Recalibrated by NATIONAL OIL
WELL 12/05/01)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Hydraulic Pump f/FOSTER 58-93R Tubing Tongs</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1970 SKYTOP 4212 Double Drum Back-In Well Service Rig, S/N-99, (Rig No.&nbsp;5)
LEBUS f/1&#148; Tubing Line, 575&#146; of 1&#148; Tubing Line, 9000&#146; of 9/16&#148; Sandline, Makeup
Catwheel, Air Clutches, PARMAC 15DR Hydromatic Brake p/b DETROIT 12V-71N Diesel
Engine w/Electric Starter, Radiator, ALLISON TG-627 Transmission, SKYTOP 96&#146;H
210,000# Static Hook Load Telescoping Mast, Hydraulically Raised &#038; Scoped, Single
3-Stage Raising Ram, Double Tubing Board, Triple Rod Basket, All Mounted on SKYTOP
5-Axle Carrier w/(4) Hydraulic Leveling Jacks, TULSA Hydraulic Utility Winch,
Folding Walkways w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work
Platform, 385/65Rx22.5 Front &#038; 10.00Rx20 Rear Tires (Unit #11026) together with
well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-iii <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON T-60 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DIEHL 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY Mark IV Hydraulic Rod Tongs, S/N-N/A</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assorted Rod Transfers</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOTCO Hydromast 0-180,000# Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1984 HAROLD LEE ENGINEERING Double Drum Back-In Well Service Rig, (Rig No.&nbsp;1)
S/N-N/A, LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 9000&#146; of 9/16&#148;
Sandline, Air Clutches, 15&#148; Double Hydromatic Brake p/b DETROIT 8V 92T Diesel
Engine, S/N-N/A, w/Electric Starter, Radiator, ALLISON CLBT-5860 Transmission,
QUINCY 325 Air Compressor, 1989 HAROLD LEE ENGINEERING 96&#146;H 250,000# Static Hook
Load Telescoping Mast, S/N-847, Hydraulically Raised &#038; Scoped, Single 3-Stage
Raising Ram, Double Tubing Board, Triple Rod Basket, All Mounted on 1984
HENDRICKSON 5-Axle Carrier, VIN-N/A (TX Lic #16P-185) w/(6) Hydraulic Leveling
Jacks, GEARMATIC Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel, Air,
Water &#038; Hydraulic Tanks, Adjustable Work Platform, 385/65Rx22.5 Front &#038; 10.00Rx20
Rear Tires (Unit #7253) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SOWA 100-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PECK-O-MATIC 63 Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS B 2-3/8&#148; Air Tubing Slips</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-iv <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KING OIL TOOLS 2 7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Stripper w/Companion Flange</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) 5/8&#148; &#038;
<SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>
&#148; &#150; 7/8&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(8) 5/8&#148; &#038;
<SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB> &#148; &#150; 7/8&#148; Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOTCO Hydromast 0 150,000# Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7 1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1975 FRANKS 1287/160 DTD-HT Double Drum Back-In Well Service Rig, (Rig No.&nbsp;2)
S/N-75022-6, LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 12,000&#146; of 9/16&#148;
Sandline, Breakout Catwheel, Air Clutches, PARMAC 122 12&#148; Double Hydromatic Brake
p/b DETROIT 8V-71 Diesel Engine, S/N-8VA308118, w/Electric Starter, Radiator,
ALLISON CLT-4460 Transmission, FRANKS Tri-Scope 96&#146;H 150,000# Static Hook Load
Telescoping Mast, S/N-D 150961193, Hydrauhcally Raised &#038; Scoped, Single 3-Stage
Raising Ram, Double Tubing Board, Triple Rod Basket, All Mounted on 1975 FRANKS
Explorer III 300C 4 Axle Carrier, VIN-195396 (TX Lic #12P-477) w/(4) Hydraulic
Leveling Jacks, KOENIG Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel,
Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform, 425/65R22.5 Front &#038;
10.00Rx20 Rear Tires (Unit #11041) together with well service tools described as
follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SOWA 100-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/2&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY-Style/CAVINS Type B-Type 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-v <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ Tubing Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(5) <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148;, 5/8&#148; &#038; 7/8&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1&#148;, 3-7/8&#148; to <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; &#038; (2)&nbsp;5/8&#148; Snapper-Type Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0-180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7-1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1982 FRANKS 1058/120 Double Drum Back-In Well Service Rig, (Rig No.&nbsp;3) S/N- 82115-6,
LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 8000&#146; of 9/16&#148; Sandline, Air
Clutches p/b DETROIT 8V-71N Diesel Engine, S/N-N/A, w/Electric Starter, Radiator, ALLISON
CLT-750 Transmission, FRANKS Tri-Scope 96&#146;H 150,000# Static Hook Load Telescoping Mast,
S/N-D150962428, Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing
Board, Triple Rod Basket, All Mounted on 1982 FRANKS Mobilrig 300 4-Axle Carrier, VIN-19310
(TX Lic #23P-938) w/(4) Hydraulic Leveling Jacks, MFG N/A Hydraulic Utility Winch, Folding
Walkways w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform,
385/65Rx22.5 Front &#038; 11.00x20 Rear Tires (Unit #7264) together with well service tools
described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>WILSON 100-Ton Tubing Block, S/N-N/A, w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/2&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-N/A, w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON JU Tubing Stripper w/Companion Flange</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>RATIGAN 20-Ton Rod Hook</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-vi <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) 5/8&#148; to 7/8&#148; &#038;
<SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB> Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6)5/8&#148; to 7/8&#148; &#038;
<SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB> Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7-1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->B-vii <!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.6
<SEQUENCE>9
<FILENAME>d44173exv10w23w6.htm
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w6</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.23.6
</DIV>

 <DIV style="width: 100%; border-bottom: 1px solid black; font-size: 1pt; margin-top: 10pt">&nbsp;</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITY AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>EASTERN OIL WELL SERVICE COMPANY<BR>
EOWS MIDLAND COMPANY<BR>
(DEBTOR)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, AS AGENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt"><B>(SECURED PARTY)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>
<DIV style="width: 100%; border-bottom: 1px solid black; font-size: 1pt; margin-top: 18pt">&nbsp;</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="1" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE I
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DEFINITIONS AND INTERPRETATION
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">1</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">1</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Credit Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">1</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">1</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">3</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">3</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">3</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">3</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE II
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GRANT OF SECURITY INTEREST
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">3</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE III
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">REPRESENTATIONS AND WARRANTIES
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">4</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Validity, Perfection and Priority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">4</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Liens; Other Financing Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">4</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Location of Debtor and Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">4</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">5</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tradenames; Prior Names
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">5</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE IV
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">COVENANTS
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">5</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">5</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Chief Executive Office
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">5</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Name or Corporate Structure
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">6</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title, Prohibited Liens and Filings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintain Records and Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">6</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Right of Inspection
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">6</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">6</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filings; Notifications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">7</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE V
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ACCOUNTS
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">7</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor Remains Liable under Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">7</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collections on Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">7</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE VI
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">POWER OF ATTORNEY
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">8</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment as Attorney-in-Fact
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">8</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Duty on the Part of Secured Party
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">9</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD   nowrap valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE VII
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">REMEDIES; RIGHTS UPON DEFAULT
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top"> 9</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights and Remedies Generally
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">9</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proceeds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">9</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collection of Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">10</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor&#146;s Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">10</TD>

</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of the Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">11</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Recourse
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2"  align="right" valign="top">11</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses; Attorneys&#146; Fees
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">12</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application of Proceeds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">12</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Duties Regarding Preservation of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD  colspan="2" align="right" valign="top">12</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Claims
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">12</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discontinuance of Proceedings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">13</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE VIII
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">13</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">13</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnity Obligations Secured by Collateral; Survival
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">14</TD>

</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD  nowrap  valign="top"><DIV style="margin-left:0px; text-indent:-0px">ARTICLE IX
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MISCELLANEOUS
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">14</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Remedies Cumulative
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">14</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination; Release
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marshalling
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severability
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">15</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">16</TD>

</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jurisdiction and Venue
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">16</TD>

</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <B>SECURITY AGREEMENT </B>(this &#147;<u>Agreement</u>&#148;), dated as of December&nbsp;28, 2006, is by and
between <B>EOWS MIDLAND COMPANY, </B>a Texas corporation <B>EASTERN OIL WELL SERVICE COMPANY, </B>a West
Virginia Corporation (collectively the &#147;<u>Debtor</u>&#148;) and <B>GUARANTY BANK, FSB, </B>a federal savings bank as
Agent (&#147;<u>Secured Party</u>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WITNESSETH:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December&nbsp;&nbsp;, 2006, by and among Debtor and the Secured Party (as amended, restated,
or supplemented from time to time, the &#147;<u>Credit Agreement</u>&#148;), the Secured Party has agreed to extend
credit to or for the benefit of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party to extend
credit to or for the benefit of the Debtor pursuant to the Credit Agreement, Debtor has agreed to
execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above</U>. As used herein, each of the terms &#147;<u>Agreement</u>,&#148; &#147;<u>Credit
Agreement</u>,&#148; &#147;<u>Debtor</u>,&#148; and &#147;<u>Secured Party</u>&#148; shall have the meaning assigned to such term
hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used herein, each of the following terms shall
have the following meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Accounts</u>&#148; shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to Debtor (including,
without limitation, under any trade names, styles, or divisions thereto), whether
arising from the sale or lease of goods or the rendition of services or any other
transaction (including, without limitation, any such obligation which might be
characterized as an account, general intangible, other than contract rights under
contracts containing prohibitions against assignment of or the granting of a
security interest in the rights of a party thereunder, or chattel paper under the
Uniform Commercial Code in effect in any jurisdiction), and all rights of Debtor in,
to, and under all purchase orders now owned or hereafter received or acquired by it
for goods or services, and all rights of Debtor to any goods the sale or lease
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of which gave rise to any of the foregoing (including, without limitation, returned or
repossessed goods and rights of unpaid sellers), and all moneys due or to become due to Debtor
under all contracts for the sale or lease of goods or the performance of services (whether or not
earned by performance) or in connection with any other transaction, now in existence or hereafter
arising, including, without limitation, all collateral security and guarantees of any kind given
by any Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Account Debtor</u>&#148; shall mean each Person obligated on an Account, Chattel Paper, or General
Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Account Records</u>&#148; shall mean (a)&nbsp;all original copies of all documents, instruments, or
other writings evidencing the Accounts, (b)&nbsp;all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to the Accounts, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems, and other papers and documents relating to the Accounts, whether in the possession or
under the control of Debtor or any computer bureau or agent from time to time acting for or on
behalf of Debtor or otherwise, (c)&nbsp;all evidences of the filing of financing statements and the
registration of other instruments in connection therewith and amendments, supplements, or other
modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgements, or other writings, including, without limitation, lien search reports, from
filing or other registration offices, (d)&nbsp;all credit information, reports, and memoranda relating
thereto, and (e)&nbsp;all other written or non written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Chattel Paper</u>&#148; shall mean all chattel paper (as such term is defined in Section&nbsp;9 105(a)(2)
of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Collateral</u>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Equipment</u>&#148; shall mean all of Debtor&#146;s equipment (including, but not limited to that
described on Exhibit&nbsp;B attached hereto), as defined in Section&nbsp;9.102(a)(33) of the UCC, in any
form, whether now owned or hereinafter acquired and wherever located including all parts thereof
and all accessories or additions thereto, whether now owned or hereafter acquired.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>General Intangibles</u>&#148; shall mean all general intangibles (as such term is defined in
Section&nbsp;9 106 of the UCC) of Debtor, including, without limitation, rights to the payment of money
(other than Accounts), net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment or grant of a security
interest by Debtor), federal income tax refunds, trade names, distributions on certificated
securities (as defined in &#167;8 102(a)(l) of the UCC) and uncertificated securities (as defined in &#167;8
102(a)(2) of the UCC), computer programs and other computer software, inventions, designs, trade
secrets, goodwill, proprietary rights, customer
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">lists, supplier contracts, sale orders, correspondence, advertising materials,
payments due in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any property, reversionary interests in pension and profit
sharing plans and reversionary, beneficial and residual interests in trusts,
credits with and other claims against any Person, together with any collateral for
any of the foregoing and the rights under any security agreement granting a
security interest in such collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Indemnitees</u>&#148; shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Proceeds</u>&#148; shall mean proceeds (as such term is defined in Section&nbsp;9 306(a)of the
UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Secured Obligations</u>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>UCC</u>&#148; shall mean the Uniform Commercial Code as in effect from time to time in the
State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148;
&#147;hereinafter,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular Article, Section, or
provision of this Agreement. References in this Agreement to Articles, Sections, or Exhibits are
to such Articles, Sections, or Exhibits of this Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GRANT OF SECURITY INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the &#147;<u>Collateral</u>&#148;):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</td></tr>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</td></tr>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>




all Equipment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all General Intangibles; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing, and all Proceeds and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Validity, Perfection and Priority</U>. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as &#147;debtor&#148; and the Secured
Party as &#147;secured party&#148; and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to which a security
interest can be perfected by the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>No Liens; Other Financing Statements</U>, (a)&nbsp;Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and clear
of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to cover any of
the Collateral is on file in any public office other than (i)&nbsp;financing statements in favor of the
Secured Party, (ii)&nbsp;financing statements for which proper termination statements have been
delivered to the Secured Party for filing, and (iii)&nbsp;financing statements filed in connection with
Permitted Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Location of Debtor and Collateral</U>. The chief executive office of Debtor is located
at One Landmark Square, Stamford, Connecticut 06901. The primary copies of the Account
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Records are located at, and all Accounts and General Intangibles are maintained at, and controlled
and directed (including, without limitation, for general accounting purposes) from, such chief
executive office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Accounts</U>. (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material respects, the
genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is and will be, in all material
respects, enforceable in accordance with its terms, (iii)&nbsp;is not and will not be subject to any
setoffs, defenses, taxes, counterclaims (except (A)&nbsp;with respect to refunds, returns, and
allowances in the ordinary course of business, and (B)&nbsp;to the extent that such Account may not yet
have been earned by performance), and (iv)&nbsp;is and will be, in all material respects, in compliance
with all applicable laws, whether federal, state, local, or foreign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Accounts which are evidenced by Chattel Paper require the consent of the Account
Debtor in respect thereof in connection with their assignment hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5 <U>Tradenames; Prior Names</u>. Debtor has not conducted business under any name other
than its current name during the last five years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Further Assurances</U>. At any time and from time to time, upon the request of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and deliver
any and all such further instruments, endorsements, powers of attorney, and other documents, make
such filings, give such notices, and take such further action as the Secured Party may reasonably
deem desirable in obtaining the full benefits of this Agreement and the rights, remedies, and
powers herein granted, including, without limitation, the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the filing of financing statements, in form acceptable to the Secured Party under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security
interests granted hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the performance of all searches of public records deemed necessary by the Secured Party to
establish and determine the priority of the security interests of the Secured Party or to determine
the presence or priority of other secured parties; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the furnishing to the Secured Party from time to time of reports and schedules in
connection with the Collateral as required pursuant to the Credit Agreement, all in reasonable
detail and in form reasonably satisfactory to the Secured Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Change of Chief Executive Office</U>. Debtor will not move its chief executive
office except to such new location as Debtor may establish in accordance with the last sentence of
this Section. The originals of all Account Records and General Intangibles will be kept at
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">such chief executive office or at the locations referred to in Section&nbsp;3.3, or at such new
locations as Debtor may establish in accordance with the last sentence of this Section. All
Accounts, Account Records, and General Intangibles of Debtor will be maintained at and controlled
and directed (including, without limitation, for general accounting purposes) from the locations
referred to in Section&nbsp;3.3 or such new locations as the Debtor may establish in accordance with the
last sentence of this Section. With respect to any new location, promptly upon the request of the
Secured Party, Debtor shall take all such action as the Secured Party may request to maintain the
security interest of the Secured Party in the Collateral granted hereby at all times fully
perfected with the same or better priority and in full force and effect. Debtor shall not establish
a new location for its chief executive office or such activities (or move any such activities from
the locations referred to in Section&nbsp;3.3) until it shall have given to the Secured Party not less
than ten days&#146; prior written notice of its intention to do so, clearly describing such new location
and providing such other information in connection therewith as the Secured Party may reasonably
request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Change of Name or Corporate Structure</U>. Debtor shall not change its name or
corporate structure or conduct business under any name other than its current name without giving
notice thereof to the Secured Party within ten days thereafter, clearly describing such new name,
or corporate structure or such new tradename and providing such other information in connection
therewith as the Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor shall take all such
action as the Secured Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral granted hereby at all times fully perfected with the same or better
priority and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Title, Prohibited Liens and Filings</U>. Debtor agrees to protect the title to the
Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer a Lien to
exist on any of the Collateral (other than in favor of the Secured Party) or sell, assign or
otherwise transfer any of the Collateral to or in favor of any Person other than the Secured Party
without the Secured Party&#146;s written consent. Debtor will not file or permit to be filed or recorded
any financing statement or other security instrument with respect to the Collateral other than in
favor of Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause to be
kept and maintained, at its own cost and expense satisfactory and complete records of the
Collateral, including, but not limited to, the originals of all documentation with respect to all
Accounts and General Intangibles and records of all payments received and all credits granted on
the Accounts, all merchandise returned, and all other dealings therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to Debtor
have full and free access during normal business hours of Debtor to all the
books, correspondence, and records and Equipment of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Possession of Collateral</U>. The Collateral shall remain in Debtor&#146;s possession or
control at all times at Debtor&#146;s risk of loss.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Financing Statement Filings; Notifications</U>. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief
place of business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts Records, or (iii)&nbsp;in the
&#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC, and (b)&nbsp;immediately notify
Secured Party of any change in Debtor&#146;s name. In any notice furnished pursuant to this Section,
Debtor will expressly state that the notice is required by this Agreement and contains facts that
will or may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ACCOUNTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured Party),
Debtor shall remain liable under each of the Accounts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. The Secured Party shall have no obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating to such Account pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of the obligations of
Debtor under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any agreement giving
rise thereto), to present or file any claim, to take any action to enforce any performance, or to
collect the payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Collections on Accounts</U>. Prior to the occurrence of an Event of Default, the
Secured Party hereby authorizes Debtor to collect the Accounts. At any time following and during
the continuance of any Event of Default, the Secured Party may curtail or terminate said authority
at any time and itself, or by its agents, collect all Accounts, and any payments of Accounts
collected by Debtor shall be held by Debtor in trust for the Secured Party, segregated from other
funds of Debtor. All Proceeds, while held by the Secured Party (or by Debtor in trust for the
Secured Party) shall continue to be Collateral securing all of the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Appointment as Attorney-in-Fact</u>. Debtor hereby irrevocably constitutes and appoints
the Secured Party and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact, with full irrevocable power and authority in the place and stead of
Debtor and in the name of Debtor or in its own name, from time to time in the discretion of the
Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the
foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor, without
notice to or assent by the Debtor, to do the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;in the case of any Account, at any time when the authority of Debtor to collect the
Accounts has been curtailed or terminated pursuant hereto, or in the case of any other Collateral,
at any time when any Event of Default shall have occurred and be continuing, in the name of Debtor
or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or with respect to,
any Collateral; in the name of Debtor or otherwise to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand for, collect,
receive payment of, and receipt for, any and all moneys, claims, and other amounts due or to become
due at any time in respect of or arising out of any Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to prepare,
sign, and file financing statements and amendments thereto in the name of Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to take or
cause to be taken all actions necessary to perform or comply or cause performance or compliance
with the terms of this Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to effect any repairs or obtain
any insurance called for by the terms of this Agreement, and to pay all or any part of the premiums
therefor and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;upon the occurrence and during the continuance of any Event of Default, (i)&nbsp;to sign and
indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtor, assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii)&nbsp;to commence and prosecute any suits, actions, or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral, (iii)&nbsp;to defend any suit, action, or
proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to settle, compromise, or
adjust any suit, action, or proceeding described in the preceding clause and, in connection
therewith, to give such discharges or releases as the Secured Party may deem appropriate, and (v)
generally, to sell or transfer and make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though the Secured Party
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">were the absolute owner thereof for all purposes, and to do, at the option of the Secured Party
and the expense of Debtor, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve, or realize upon the Collateral and the Liens
of the Secured Party thereon and to effect the intent of this Agreement, all as fully and
effectively as Debtor might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to execute,
in connection with any foreclosure, any endorsements, assignments, or other instruments of
conveyance or transfer with respect to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or failure
to act hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REMEDIES; RIGHTS UPON DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed to in
any way limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Proceeds</U>. If an Event of Default shall occur and be continuing, in addition to
the rights of the Secured Party specified with respect to the payment of Accounts, (a)&nbsp;all Proceeds
received by Debtor consisting of cash, checks, and other near cash items shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds
received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Collection of Accounts</u>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may instruct the obligor or obligors on any obligation owing or
purporting to be owed to Debtor constituting the Collateral (including, without limitation, the
Accounts) to make any payment required by the terms of such obligation directly to the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the Secured Party shall have the right from time to time to modify (including, without
limitation, to extend the time for payment or arrange for payment in installments) or waive
rights under any such obligation and to compromise or settle counterclaims or setoffs
with the obligor under any such obligation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any and all of such proceeds of such collections paid to the Secured Party, or any part
thereof, (after deduction of the Secured Party&#146;s expenses of collection, including, without
limitation, reasonable attorneys&#146; fees and disbursements), shall be applied by the Secured Party as
provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Disposition of Collateral</u>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may direct Debtor to sell, assign, or otherwise liquidate or dispose of
all or from time to time any portion of the Collateral, and Debtor shall do so, and the Secured
Party may take possession of the Proceeds of such Collateral. The Secured Party may direct Debtor
to direct that all Proceeds of such Collateral be paid directly to the Secured Party or may permit
the Proceeds of such Collateral to be paid to Debtor and all such Proceeds consisting of cash,
checks, or near cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor in a separate deposit account containing only Proceeds and shall forthwith
upon receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any and all such Proceeds received by the Secured Party (whether from Debtor or
otherwise), shall be applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts</u>. If an Event of Default shall occur and be continuing, the
Secured Party may liquidate any securities held in any accounts of Debtor and apply the proceeds
thereof and any other amounts held in any accounts of Debtor as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral</u>. If an Event of Default shall occur and be continuing,
(a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral (including the originals of all or any Accounts and Account Records) or any part
thereof, from Debtor or any other Person which then has possession of any part thereof with or
without notice or judicial process, and for that purpose may enter upon Debtor&#146;s premises where any
of the Collateral is located and remove the same and may make reasonable use in connection with
such removal of any and all services, supplies, aids, and other facilities of Debtor, and (b)&nbsp;upon
three days&#146; notice to Debtor, Debtor shall, at its own expense, assemble the Collateral, including,
without limitation, the originals of all Account Records (or from time to time any
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">portion thereof) and make it available to the Secured Party by delivery to the Secured Party at any
location designated by the Secured Party which is reasonably convenient to both parties, whether at
the premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store
and keep any Collateral so assembled at such place or places pending further action by the Secured
Party and while the Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. Debtor&#146;s obligation to so assemble and deliver the Collateral is of
the essence of this Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by the
Debtor of such obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such terms
and conditions and at such price as may be commercially reasonable, for cash or on credit or for
future delivery without assumption of any credit risk. Any of the Collateral may be sold, leased,
assigned, or options or contracts entered to do so, or otherwise disposed of, in the condition in
which the same existed when taken by the Secured Party or after any overhaul or repair which may be
commercially reasonable. Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten days&#146; written notice to Debtor specifying the time
after which such disposition is to be made and the intended sale price or other consideration
therefor. Any such disposition which shall be a public sale shall be made upon not less than ten
days&#146; written notice to Debtor (which Debtor agrees to be commercially reasonable) specifying the
time and place of such sale and, in the absence of applicable requirements of law to the contrary,
shall be by public auction (which may, at the option or the Secured Party, be subject to reserve),
after publication of commercially reasonable notice of such auction. To the extent permitted by
applicable law, the Secured Party may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this Section without accountability to Debtor
(except to the extent of surplus money received) as provided below. In the payment of the purchase
price of the Collateral, the purchaser shall be entitled to have credit on account of the purchase
price thereof of amounts owing to such purchaser on account of any of the Secured Obligations and
any such purchaser may deliver notes, claims for interest, or claims for other payment with respect
to such Secured Obligations in lieu of cash up to the amount which would, upon distribution of the
net proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder shall
be less than the amount due thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment. Notwithstanding the foregoing, if the Collateral
or any portion thereof is perishable or threatens to decline speedily in value or is of a type
customarily sold in a recognized market only such notice as shall be reasonably practicable shall
be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses; Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys&#146; fees and legal expenses incurred by the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds</U>. The proceeds of any disposition of Collateral shall be
applied as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;to the payment of any and all reasonable expenses and fees (including attorneys&#146; fees and
disbursements) incurred by the Secured Party in connection with the exercise of its rights and
remedies hereunder, including, without limitation, reasonable expenses and fees in connection with
obtaining, taking possession of, removing, holding, insuring, repairing, preparing for sale or
lease, storing and disposing of Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;to the satisfaction of the Secured Obligations in such order as the Secured Party may
elect; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;after the indefeasible payment in full in cash of all Secured Obligations, to Debtor or to
whomever may lawfully be entitled to receive the same or as a court of competent jurisdiction may
direct.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral</u>. The Secured Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting willful misconduct and/or gross negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims</u>. Except as otherwise provided in this Agreement, Debtor
hereby waives, to the extent permitted by applicable law, notice of and judicial hearing in
connection with the Secured Party&#146;s taking possession or the Secured Party&#146;s disposition of any of
the Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;all damages occasioned by such taking of possession except any damages which are the
direct result of the willful misconduct and/or gross negligence of the Secured Party;
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;all other requirements as to the time, place, and terms of sale or other requirements with
respect to the enforcement of the rights of the Secured Party hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;demand of performance or other demand, notice of intent to demand or accelerate, notice of
acceleration, presentment, protest, advertisement, or notice of any kind to or upon Debtor or any
other Person, except as may be required by the Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in order to stay or
delay the enforcement of this Agreement, including the absolute sale of the Collateral or any
portion thereof, and Debtor, for itself and all who may claim under it, insofar as it or they now
or hereafter lawfully may, hereby waives the benefit of all such laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have instituted
any proceeding to enforce any right, power, or remedy under this Agreement by foreclosure, sale,
entry, or otherwise, and such proceeding shall have been discontinued or abandoned for any reason,
then and in every such case, Debtor and the Secured Party shall be returned to their former
positions and rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the Secured Party shall
continue as if no such proceeding had been instituted.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U><B>INDEMNITY</B></U><B>.</B> (a)&nbsp;<B>DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS&#146; FEES AND
EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED
&#147;EXPENSES&#148;)</b> <B>OF WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY
ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS
EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE ADMINISTRATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS OF OR THE PRESERVATION OF
ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE NEGLIGENCE, WHETHER
SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE INDEMNIFIED
PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE WILLFUL MISCONDUCT AND/OR
GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any assertion that could
give rise to an Expense, Debtor shall assume full responsibility for the defense thereof. Without
limiting the application of part (a)&nbsp;of this Section, Debtor agrees to pay
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-13-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or reimburse such Indemnitee on demand for any and all reasonable fees, costs, and expenses of
whatever kind or nature incurred in connection with the creation, preservation, or protection of
the Secured Party&#146;s Liens on, and security interests in, the Collateral, including, without
limitation, all reasonable fees and taxes in connection with the recording or filing of instruments
and documents in public offices, payment, or discharge of any taxes or Liens or security interests
upon or in respect of the Collateral, premiums for insurance with respect to the Collateral, all
reasonable expenses incurred in the custody, preservation, use, or operation of the Collateral when
Collateral is in the Secured Party&#146;s possession, and all other reasonable fees, costs, and expenses
in connection with protecting, maintaining, or preserving the Collateral and the Secured Party&#146;s
interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting
any actions, suits, or proceedings arising out of or relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor agrees to
pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral; Survival</U>. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article&nbsp;VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>No Waiver; Remedies Cumulative</U>. No failure or delay on the part of the Secured
Party in exercising any right, power, or privilege hereunder and no course of dealing between any
Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. A waiver by the Secured Party of
any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Party would otherwise have on any future occasion. The rights and
remedies herein expressly provided are cumulative, may be exercised singly or concurrently and as
often and in such order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or now or hereafter
existing under applicable law. No notice to or demand on Debtor in any case shall entitle Debtor
to any other or further notice or demand in similar or other circumstances or constitute a waiver
of the rights of the Secured Party to any other or further action in any circumstances without
notice or demand.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-14-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Termination; Release</U>. When the Secured Obligations have been indefeasibly
paid and performed in full and the Commitment has terminated, this Agreement shall terminate, and
the Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor
the proper instruments (including Uniform Commercial Code termination statements) acknowledging
the termination of this Agreement, and will duly assign, transfer, and deliver to Debtor, without
recourse, representation, or warranty of any kind whatsoever, such of the Collateral as may be in
possession of the Secured Party and has not theretofore been disposed of, applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the
Secured Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Severability</U>. In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this Agreement
shall be sufficient as a financing statement and may be filed in lieu of the original to the
extent permitted by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications</U>. Except as to oral notices expressly authorized
herein, all notices, requests, and communications under this Agreement shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such notice, request, or
communication shall be deemed to have been duly given or made when provided in accordance with the
terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.
No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification,
discharge, or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U><B>Entire Agreement</B></U><B>. </B><FONT style="font-variant: SMALL-CAPS"><B>This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject hereof and shall</B></FONT>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>supersede any prior agreements, whether written or oral, between the Parties hereto
relating to the subject hereof. Furthermore, in this regard, this Agreement and the other written
Loan Documents represent, collectively, the final agreement among the
Parties hereto and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of such Parties.
There are no unwritten oral agreements among such Parties.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U><B>Governing Law</B></U><B>. </B><FONT style="font-variant: SMALL-CAPS"><B>This Agreement shall be governed by and construed in
accordance with the Laws of the State of Texas (without giving effect to principles thereof
relating to conflicts of laws).</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U><B>Jurisdiction and Venue</B></U><B>. </B><FONT style="font-variant: SMALL-CAPS"><B>All actions or proceedings with respect to, arising
directly or indirectly in connection with, out of, related to or from this Agreement or any other
Loan Document to which any Debtor is a Party may be litigated at the sole discretion and election
of the Secured Party, in courts having situs in Dallas, Dallas County, Texas. Debtor hereby
submits to the jurisdiction of any local, state, or federal court located in Dallas, Dallas
County, Texas, and hereby waives any rights it may have to transfer or change the jurisdiction or
venue of any litigation brought against it by the Secured Party in accordance with this
Section.</B></FONT>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>DEBTOR</B></U><B>:<BR>

<BR>
EOWS MIDLAND COMPANY<BR>
EASTERN OIL WELL SERVICE COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer,
and<br> Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>SECURED PARTY</B></U><B>:<BR>
<BR>
GUARANTY BANK, FSB</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ David M. Butler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">David M. Butler&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT A</B></U>
</DIV>


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Section&nbsp;3.1:</TD>
    <TD>&nbsp;</TD>
    <TD>FILING LOCATIONS</TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">&nbsp;Secretary of State of Texas
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">&nbsp;Secretary of State of West Virginia
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->A-i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT B</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DESCRIPTION OF EQUIPMENT</B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1980 WILSON Mogul 42B D/D Drum Back-In Well Service Rig, S/N-10677, (Rig No.&nbsp;2) LEBUS f/1&#148;
Tubing Line, 650&#146; of 1&#148; Tubing Line, 9,000&#146; of 9/16&#148; Sandline, Air Clutches, PARMAC 22SR
Hydromatic Brake p/b DETROIT 12V-71N Diesel Engine, S/N-N/A, w/Electric Starter, Radiator,
ALLISON CLBT-5860 Transmission, WILSON 96&#146;H 180,000# Static Hook Load Telescoping Mast,
S/N-N/A, Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing Board,
Triple Rod Basket, All Mounted on WILSON 5-Axle Carrier, VIN-N/A (TX Lic #16P-146), w/(6)
Hydraulic Leveling jacks, KOENIG Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel,
Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform, 445/65Rx22.5 Front &#038; 11.00x20 Rear
Tires (unit #8617) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83 A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93 Hydraulic Tubing Tongs, S/N-1840, w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS Type C-101 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KING OIL TOOLS 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DENCON 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ Mark IV Hydraulic Rod Tongs, S/N-SR3298RR</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL WORKS, INC. (Rebuilt TOTCO) Hydromast Pad-Type Weight Indicator, S/N-2007</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1980 WILSON Mogul 42B Double Drum Back-In Well Service Rig, S/N-10650, (Rig No.&nbsp;3) ZEBUS
f/1&#148; Tubing Line, 575&#146; of 1&#148; Tubing Line, 11,000&#146; of 9/16&#148; Sandline, Air</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Clutches, PARMAC 122 Hydromatic Brake, S/N-53087, p/b DETROIT 8V-71N Diesel Engine
w/Electric Starter, Radiator, ALLISON CLBT-5860 Transmission, WILSON 96-180 96&#146;H 180,000#
Static Hook Load Telescoping Mast, S/N-N/A, Hydraulically Raised &#038; Scoped, Single 3-Stage
Raising Ram, Double Tubing Board, Triple Rod Basket, All Mounted on WILSON 5-Axle Carrier,
VIN-N/A (TX Lic #16P-147), w/(4) Hydraulic Leveling jacks, (4)&nbsp;Manual Leveling Jacks, KOENIG
Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks,
Adjustable Work Platform, 385/65Rx22.5 Front &#038; 10.00Rx20 Rear Tires (unit #8616) together
with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-632, w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS Type TC-101 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ Mark IV Hydraulic Rod Tongs, S/N-2310</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>RATIGAN 20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BELL RUBBER BRS 1 Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL WORKS, INC. (Rebuilt TOTCO) Hydromast Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1968 SKYTOP 4210 Double Drum Back-In Well Service Rig, S/N-4210-382, (Rig No.
4) LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 13,000&#146; of 9/16&#148; Sandline, Air Clutches,
PARMAC 15&#148; DR Hydromatic Brake p/b DETROIT 8V-71N Diesel Engine,<BR>
S/N-8VA794503, w/Electric Starter, Radiator, ALLISON CLBT-4460 Transmission, SKYTOP 96&#146;H 180,000# Static Hook Load
Telescoping Mast, S/N-LXT120, Hydraulically Raised &#038; Scoped, Single 3 Stage Raising Ram,
Double Tubing Board, Triple Rod Basket, All Mounted on 1968 SKYTOP 4 Axle Carrier, VIN-N/A,
w/(4)</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-ii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Hydraulic Leveling Jacks, Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel, Air,
Water &#038; Hydraulic Tanks, Adjustable Work Platform, 385/65Rx22.5 Front &#038; 10.00x20 Rear Tires
(Unit #11016) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 75-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) Rod Clevises</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-436, w/Backup &#038; Lift Cylinders w/(2) Sets 4 1/2&#148;
Backup Dies, (1)&nbsp;5 1/2&#148; Drag Ring &#038; Top Plate, Extra Sets of 2 3/8&#148; to 4 1/2&#148; Heads</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS TB-101 Air Tubing Slips w/2-3/8&#148;, 2-7/8&#148;, 4-1/2&#148; &#038; 5-1/2&#148; Inserts</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CARTER TOOL CO. Hydraulic Rod Tongs, S/N-N/A</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators, (2)&nbsp;1.25&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches, (2)&nbsp;1.25&#148; Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0 220,000# Weight Indicator (Recalibrated by NATIONAL OIL WELL
12/05/01)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Hydraulic Pump f/FOSTER 58-93R Tubing Tongs</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1970 SKYTOP 4212 Double Drum Back-In Well Service Rig,
S/N-99, (Rig No.&nbsp;5) LEBUS f/1&#148; Tubing Line, 575&#146; of 1&#148; Tubing Line, 9000&#146; of 9/16&#148; Sandline, Makeup Catwheel,
Air Clutches, PARMAC 15DR Hydromatic Brake p/b DETROIT 12V-71N Diesel Engine w/Electric
Starter, Radiator, ALLISON TG-627 Transmission, SKYTOP 96&#146;H 210,000# Static Hook Load
Telescoping Mast, Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing
Board, Triple Rod Basket, All Mounted on<BR> SKYTOP 5-Axle Carrier w/(4) Hydraulic Leveling
Jacks, TULSA Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel, Air, Water &#038;
Hydraulic Tanks, Adjustable Work Platform, 385/65Rx22.5 Front &#038; 10.00Rx20 Rear Tires (Unit
#11026) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>McKISSICK 83A 100-Ton Weighted Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-iii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinders</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON T-60 2-3/8&#148; to 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DIEHL 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY Mark IV Hydraulic Rod Tongs, S/N-N/A</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assorted Rod Transfers</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOTCO Hydromast 0-180,000# Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1984 HAROLD LEE ENGINEERING Double Drum Back-In Well Service Rig, (Rig No.
1) S/N-N/A, LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 9000&#146; of 9/16&#148; Sandline, Air
Clutches, 15&#148; Double Hydromatic Brake p/b DETROIT 8V 92T Diesel Engine, S/N-N/A, w/Electric
Starter, Radiator, ALLISON CLBT-5860 Transmission, QUINCY 325 Air Compressor, 1989 HAROLD
LEE ENGINEERING 96&#146;H 250,000# Static Hook Load Telescoping Mast, S/N-847, Hydraulically
Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing Board, Triple Rod Basket, All
Mounted on 1984 HENDRICKSON 5-Axle Carrier, VIN-N/A (TX Lic #16P-185) w/(6) Hydraulic
Leveling Jacks, GEARMATIC Hydraulic Utility Winch, Folding Walkways w/Stairs, Fuel, Air,
Water &#038; Hydraulic Tanks, Adjustable Work Platform, 385/65Rx22.5 Front &#038; 10.00Rx20 Rear Tires
(Unit #7253) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SOWA 100-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 2-1/4&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PECK-O-MATIC 63 Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CAVINS B 2-3/8&#148; Air Tubing Slips</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-iv<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KING OIL TOOLS 2 7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tubing Stripper w/Companion Flange</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) 5/8&#148; &#038; <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; - 7/8&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(8) 5/8&#148; &#038; <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; - 7/8&#148; Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOTCO Hydromast 0 150,000# Pad-Type Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7 1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1975 FRANKS 1287/160 DTD-HT Double Drum Back-In Well Service Rig, (Rig No.&nbsp;2)
S/N-75022-6, LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 12,000&#146; of 9/16&#148; Sandline,
Breakout Catwheel, Air Clutches, PARMAC 122 12&#148; Double Hydromatic Brake p/b DETROIT 8V-71
Diesel Engine, S/N-8VA308118, w/Electric Starter, Radiator, ALLISON CLT-4460 Transmission,
FRANKS Tri-Scope 96&#146;H 150,000# Static Hook Load Telescoping Mast, S/N-D150961193,
Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing Board, Triple Rod
Basket, All Mounted on 1975 FRANKS Explorer III 300C 4 Axle Carrier, VIN-195396 (TX Lic
#12P-477) w/(4) Hydraulic Leveling Jacks, KOENIG Hydraulic Utility Winch, Folding Walkways
w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform, 425/65R22.5 Front &#038;
10.00Rx20 Rear Tires (Unit #11041) together with well service tools described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SOWA 100-Ton Tubing Block w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/2&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY-Style/CAVINS Type B-Type 2-7/8&#148; Air Tubing Slips</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-v<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ Tubing Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 20-Ton Rod Hook</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(5) <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148;, 5/8&#148; &#038; 7/8&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1&#148;, 3-7/8&#148; to <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; &#038; (2)&nbsp;5/8&#148; Snapper-Type Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER Clipper 0-180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7-1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1982 FRANKS 1058/120 Double Drum Back-In Well Service Rig, (Rig No.&nbsp;3) S/N-
82115-6, LEBUS f/1&#148; Tubing Line, 650&#146; of 1&#148; Tubing Line, 8000&#146; of 9/16&#148; Sandline, Air
Clutches p/b DETROIT 8V-71N Diesel Engine, S/N-N/A, w/Electric Starter, Radiator, ALLISON
CLT-750 Transmission, FRANKS Tri-Scope 96&#146;H 150,000# Static Hook Load Telescoping Mast,
S/N-Dl50962428, Hydraulically Raised &#038; Scoped, Single 3-Stage Raising Ram, Double Tubing
Board, Triple Rod Basket, All Mounted on 1982 FRANKS Mobilrig 300 4-Axle Carrier, VIN-19310
(TX Lic #23P-938) w/(4) Hydraulic Leveling Jacks, MFG N/A Hydraulic Utility Winch, Folding
Walkways w/Stairs, Fuel, Air, Water &#038; Hydraulic Tanks, Adjustable Work Platform,
385/65Rx22.5 Front &#038; 11.00x20 Rear Tires (Unit #7264) together with well service tools
described as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>WILSON 100-Ton Tubing Block, S/N-N/A, w/(3) 24&#148; Sheaves f/1&#148; Line</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rod Clevis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(2) 1-1/2&#148; x 72&#148; Elevator Links</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FOSTER 58-93R Hydraulic Tubing Tongs, S/N-N/A, w/Backup &#038; Lift Cylinder</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON Type H Double Oil Saver w/Hand Pump, Lubricator &#038; Hose</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>OIL COUNTRY 2-3/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>BJ 2-7/8&#148; 100-Ton Center Latch Tubing Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TIW 2-3/8&#148; Tubing Safety Valve</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>GUIBERSON JU Tubing Stripper w/Companion Flange</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>RATIGAN 20-Ton Rod Hook</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-vi<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DOUBLE E Rod Stripper</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) 5/8&#148; to 7/8&#148; &#038; <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; Rod Elevators</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(6) 5/8&#148; to 7/8&#148; &#038; <SUP style="font-size: 85%; vertical-align: text-top">3</SUP>/<SUB style="font-size: 85%; vertical-align: text-bottom">4</SUB>&#148; Snapper-Type Rod Wrenches</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MARTIN-DECKER 180,000# Weight Indicator</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>TOWNSEND 7-1/16&#148; 3000# Double Hydraulic Blowout Preventer</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->B-vii<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.7
<SEQUENCE>10
<FILENAME>d44173exv10w23w7.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w7</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.23.7
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SOUTHWEST OILFIELD CONSTRUCTION COMPANY<BR>
(DEBTOR)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, AGENT<BR>
(SECURED PARTY)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Page</b></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE I DEFINITIONS AND INTERPRETATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.1 Terms Defined Above</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2 Terms Defined in Credit Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3 Additional Defined Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.4 Undefined Financial Accounting Terms</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5 References</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.6 Articles and Sections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.7 Number and Gender</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE II GRANT OF SECURITY INTEREST</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE III REPRESENTATIONS AND WARRANTIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1 Validity, Perfection and Priority</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2 No Liens; Other Financing Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3 Location of Debtor and Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.4 Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.5
Tradenames; Prior Names</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IV COVENANTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1 Further Assurances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2 Change of Chief Executive Office</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3 Change of Name or Corporate Structure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4 Title, Prohibited Liens and Filings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5 Maintain Records and Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.6 Right of Inspection</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.7 Possession of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.8
Financing Statement Filings; Notifications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE V ACCOUNTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1 Debtor Remains Liable under Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2
Collections on Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VI POWFR OF ATTORNEY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1 Appointment as Attorney- in-Fact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2 No Duty
on the Part of Secured Party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VII
REMEDIES; RIGHTS UPON DEFAULT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1 Rights and Remedies Generally</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2 Proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3 Collection of Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4 Disposition of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.5 Debtor&#146;s Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.6 Possession of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Page</b></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.7 Disposition of the Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.8 Recourse</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.9 Expenses; Attorneys&#146; Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.10 Application of Proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.11 Limitation on Duties Regarding Preservation of Collateral</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.12 Waiver of Claims</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.13 Discontinuance of Proceedings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE VIII INDEMNITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.1 INDEMNITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.2
Indemnity Obligations Secured by Collateral; Survival</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ARTICLE IX MISCELLANEOUS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.1 No Waiver; Remedies Cumulative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.2 Termination; Release</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.3 Counterparts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.4 Marshalling</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.5 Severability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.6 Financing Statement Filing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.7 Notices and Other Communications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.8 Parties in Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.9 Amendments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.10 Entire Agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.11 Governing Law&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.12 Jurisdiction and Venue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->- ii - <!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <B>AMENDED AND RESTATED SECURITY AGREEMENT </B>(this &#147;<U>Agreement</U>&#148;), dated as of December
28, 2006, is by and between <B>SOUTHWEST OILFIELD CONSTRUCTION COMPANY</B>, an Oklahoma corporation (the
&#147;<U>Debtor</u>&#148;) and <B>GUARANTY BANK, FSB</B>, a federal savings bank as Agent for the benefit of the Lenders (&#147;<U>Secured Party</u>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>W I T N E S S E T H:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December&nbsp;28, 2006, by and among Debtor and the Secured Party and the Lenders
signatory thereto (as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</u>&#148;), the Secured Party and the Lenders have agreed to extend credit to or for the benefit
of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Debtor and Secured Party entered into a Security Agreement dated as of June&nbsp;6,
2006, and the parties hereto desire to amend and restate such Security Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party and the
Lenders to extend credit to or for the benefit of the Debtor pursuant to the Credit Agreement,
Debtor has agreed to execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1
<U>Terms Defined Above</U>. As used herein, each of the terms
&#147;<u>Agreement</u>,&#148;
&#147;<u>Credit Agreement</u>,&#148; &#147;<u>Debtor</u>,&#148; and
&#147;<u>Secured Party</u>&#148; shall have the meaning assigned to such term
hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms</U>. As used herein, each of the following terms shall have
the following meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Accounts</u>&#148; shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to Debtor (including,
without limitation, under any trade names, styles, or divisions thereto), whether
arising from the sale or lease of goods or the rendition of services or any other
transaction (including, without limitation, any such obligation which might be
characterized as an account, general intangible, other than contract rights under
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">contracts containing prohibitions against assignment of or the granting of a security interest in
the rights of a party thereunder, or chattel paper under the Uniform Commercial Code in effect in
any jurisdiction), and all rights of Debtor in, to, and under all purchase orders now owned or
hereafter received or acquired by it for goods or services, and all rights of Debtor to any goods
the sale or lease of which gave rise to any of the foregoing (including, without limitation,
returned or repossessed goods and rights of unpaid sellers), and all moneys due or to become due to
Debtor under all contracts for the sale or lease of goods or the performance of services (whether
or not earned by performance) or in connection with any other transaction, now in existence or
hereafter arising, including, without limitation, all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; shall mean each Person obligated on an Account, Chattel Paper, or
General Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Records</U>&#148; shall mean (a)&nbsp;all original copies of all documents, instruments,
or other writings evidencing the Accounts, (b)&nbsp;all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to the Accounts, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record
keeping systems, and other papers and documents relating to the Accounts, whether in the
possession or under the control of Debtor or any computer bureau or agent from time to time acting
for or on behalf of Debtor or otherwise, (c)&nbsp;all evidences of the filing of financing statements
and the registration of other instruments in connection therewith and amendments, supplements, or
other modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgements, or other writings, including, without limitation, lien search reports, from
filing or other registration offices, (d)&nbsp;all credit information, reports, and memoranda relating
thereto, and (e)&nbsp;all other written or non written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Chattel
Paper</u>&#148; shall mean all chattel paper (as such term is defined in Section&nbsp;9 105(a)(2)
of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Collateral</u>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Equipment</u>&#148; shall mean all of Debtor&#146;s equipment (including, but not limited to that
described on Exhibit&nbsp;B attached hereto), as defined in Section&nbsp;9.102(a)(33) of the UCC, in any
form, whether now owned or hereinafter acquired and wherever located including all parts thereof
and all accessories or additions thereto, whether now owned or hereafter acquired.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General Intangibles</U>&#148; shall mean all general intangibles (as such term is defined in
Section&nbsp;9 106 of the UCC) of Debtor, including, without limitation, rights to the payment of money
(other than Accounts), net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">franchises which prohibit the assignment or grant of a security interest by
Debtor), federal income tax refunds, trade names, distributions on certificated
securities (as defined in &#167;8 102(a)(l) of the UCC) and uncertificated securities
(as defined in &#167;8 102(a)(2) of the UCC), computer programs and other computer
software, inventions, designs, trade secrets, goodwill, proprietary rights,
customer lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, credits with and other claims against any Person, together
with any collateral for any of the foregoing and the rights under any security
agreement granting a security interest in such collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Indemnitees</u>&#148; shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Proceeds</u>&#148; shall mean proceeds (as such term is defined in Section&nbsp;9 306(a) of
the UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</U>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>UCC</u>&#148; shall mean the Uniform Commercial Code as in effect from time to time in the
State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148; &#147;hereinafter,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular Article, Section, or
provision of this Agreement. References in this Agreement to Articles, Sections, or Exhibits are
to such Articles, Sections, or Exhibits of this Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.
</DIV>




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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GRANT OF SECURITY INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the &#147;<u>Collateral</u>&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Equipment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all General Intangibles; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing, and all Proceeds and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>Validity, Perfection and Priority</U>. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as &#147;debtor&#148; and the Secured
Party as &#147;secured party&#148; and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to which a security
interest can be perfected by the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and clear
of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to
cover any of the Collateral is on file in any public office other than (i)&nbsp;financing statements in
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">favor of the Secured Party, (ii)&nbsp;financing statements for which proper termination
statements have been delivered to the Secured Party for filing, and (iii)&nbsp;financing statements
filed in connection with Permitted Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Location of Debtor and Collateral</U>. The chief executive office of Debtor is located
at One Landmark Square, Stamford, Connecticut 06901. The primary copies of the Account Records
are located at, and all Accounts and General Intangibles are maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from, such chief
executive office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Accounts.</U> (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material respects, the
genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is and will be, in all material
respects, enforceable in accordance with its terms, (iii)&nbsp;is not and will not be subject to any
setoffs, defenses, taxes, counterclaims (except (A)&nbsp;with respect to refunds, returns, and
allowances in the ordinary course of business, and (B)&nbsp;to the extent that such Account may not yet
have been earned by performance), and (iv)&nbsp;is and will be, in all material respects, in compliance
with all applicable laws, whether federal, state, local, or foreign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Accounts which are evidenced by Chattel Paper require the consent of the Account
Debtor in respect thereof in connection with their assignment hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<U>Tradenames; Prior Names</U>. Debtor has not conducted business under any name other
than its current name during the last five years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Further Assurances</U>. At any time and from time to time, upon the request of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney, and other
documents, make such filings, give such notices, and take such further action as the Secured Party
may reasonably deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the filing of financing statements, in form acceptable to the Secured Party under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security
interests granted hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the performance of all searches of public records deemed necessary by the Secured Party to
establish and determine the priority of the security interests of the Secured Party or to determine
the presence or priority of other secured parties; and
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the furnishing to the Secured Party from time to time of reports and schedules in
connection with the Collateral as required pursuant to the Credit Agreement, all in reasonable
detail and in form reasonably satisfactory to the Secured Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Change of Chief Executive Office</U>. Debtor will not move its chief executive
office except to such new location as Debtor may establish in accordance with the last sentence of
this Section. The originals of all Account Records and General Intangibles will be kept at such
chief executive office or at the locations referred to in Section&nbsp;3.3, or at such new locations as
Debtor may establish in accordance with the last sentence of this Section. All Accounts, Account
Records, and General Intangibles of Debtor will be maintained at and controlled and directed
(including, without limitation, for general accounting purposes) from the locations referred to in
Section&nbsp;3.3 or such new locations as the Debtor may establish in accordance with the last sentence
of this Section. With respect to any new location, promptly upon the request of the Secured Party,
Debtor shall take all such action as the Secured Party may request to maintain the security
interest of the Secured Party in the Collateral granted hereby at all times fully perfected with
the same or better priority and in full force and effect. Debtor shall not establish a new location
for its chief executive office or such activities (or move any such activities from the locations
referred to in Section&nbsp;3.3) until it shall have given to the Secured Party not less than ten days&#146;
prior written notice of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Secured Party may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Change of Name or Corporate Structure</U>. Debtor shall not change its name or
corporate structure or conduct business under any name other than its current name without giving
notice thereof to the Secured Party within ten days thereafter, clearly describing such new name,
or corporate structure or such new tradename and providing such other information in connection
therewith as the Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor shall take all such
action as the Secured Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral granted hereby at all times fully perfected with the same or better
priority and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
<U>Title, Prohibited Liens and Filings</U>. Debtor agrees to protect the title to the
Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer a Lien to
exist on any of the Collateral (other than in favor of the Secured Party) or sell, assign or
otherwise transfer any of the Collateral to or in favor of any Person other than the Secured Party
without the Secured Party&#146;s written consent. Debtor will not file or permit to be filed or recorded
any financing statement or other security instrument with respect to the Collateral other than in
favor of Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause to be kept
and maintained, at its own cost and expense satisfactory and complete records of the Collateral,
including, but not limited to, the originals of all documentation with respect to all Accounts and
General Intangibles and records of all payments received and all credits granted on the Accounts,
all merchandise returned, and all other dealings therewith.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to Debtor
have full and free access during normal business hours of Debtor to all the books,
correspondence, and records and Equipment of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Possession of Collateral</U>. The Collateral shall remain in Debtor&#146;s possession or
control at all times at Debtor&#146;s risk of loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8
<U>Financing Statement Filings; Notifications</U>. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief
place of business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts Records, or (iii)&nbsp;in the
&#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC, and (b)&nbsp;immediately notify
Secured Party of any change in Debtor&#146;s name. In any notice furnished pursuant to this Section,
Debtor will expressly state that the notice is required by this Agreement and contains facts that
will or may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ACCOUNTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured Party),
Debtor shall remain liable under each of the Accounts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. The Secured Party shall have no obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating to such Account pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of the obligations of
Debtor under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any agreement giving
rise thereto), to present or file any claim, to take any action to enforce any performance, or to
collect the payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Collections on Accounts</U>. Prior to the occurrence of an Event of Default, the
Secured Party hereby authorizes Debtor to collect the Accounts. At any time following and during
the continuance of any Event of Default, the Secured Party may curtail or terminate said authority
at any time and itself, or by its agents, collect all Accounts, and any payments of
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts collected by Debtor shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor. All Proceeds, while held by the Secured Party (or by Debtor in trust
for the Secured Party) shall continue to be Collateral securing all of the Secured Obligations and
shall not constitute payment thereof until applied as hereinafter provided.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time in the discretion
of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of
the foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor,
without notice to or assent by the Debtor, to do the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;in the case of any Account, at any time when the authority of Debtor to collect the
Accounts has been curtailed or terminated pursuant hereto, or in the case of any other Collateral,
at any time when any Event of Default shall have occurred and be continuing, in the name of Debtor
or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or with respect to,
any Collateral; in the name of Debtor or otherwise to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand for, collect,
receive payment of, and receipt for, any and all moneys, claims, and other amounts due or to become
due at any time in respect of or arising out of any Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to prepare,
sign, and file financing statements and amendments thereto in the name of Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to take or
cause to be taken all actions necessary to perform or comply or cause performance or compliance
with the terms of this Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to effect any repairs or obtain
any insurance called for by the terms of this Agreement, and to pay all or any part of the premiums
therefor and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;upon the occurrence and during the continuance of any Event of Default, (i)&nbsp;to sign and
indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtor, assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii)&nbsp;to commence and prosecute any suits, actions, or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral, (iii)&nbsp;to defend any
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">suit, action, or proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to settle,
compromise, or adjust any suit, action, or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as the Secured Party may deem
appropriate, and (v)&nbsp;generally, to sell or transfer and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the Secured Party were
the absolute owner thereof for all purposes, and to do, at the option of the Secured Party and the
expense of Debtor, at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve, or realize upon the Collateral and the Liens of the Secured
Party thereon and to effect the intent of this Agreement, all as fully and effectively as Debtor
might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to execute,
in connection with any foreclosure, any endorsements, assignments, or other instruments of
conveyance or transfer with respect to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or
failure to act hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REMEDIES; RIGHTS UPON DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed to in
any way limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Proceeds</U>. If an Event of Default shall occur and be continuing, in addition to the
rights of the Secured Party specified with respect to the payment of Accounts, (a)&nbsp;all Proceeds
received by Debtor consisting of cash, checks, and other near cash items shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Collection of Accounts</U>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may instruct the obligor or obligors on any obligation owing or
purporting to be owed to Debtor constituting the Collateral (including, without limitation, the
Accounts) to make any payment required by the terms of such obligation directly to the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the Secured Party shall have the right from time to time to modify (including, without
limitation, to extend the time for payment or arrange for payment in installments) or waive
rights under any such obligation and to compromise or settle counterclaims or setoffs
with the obligor under any such obligation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any and all of such proceeds of such collections paid to the Secured Party, or any part
thereof, (after deduction of the Secured Party&#146;s expenses of collection, including, without
limitation, reasonable attorneys&#146; fees and disbursements), shall be applied by the Secured Party
as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Disposition of Collateral</U>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may direct Debtor to sell, assign, or otherwise liquidate or dispose of
all or from time to time any portion of the Collateral, and Debtor shall do so, and the Secured
Party may take possession of the Proceeds of such Collateral. The Secured Party may direct Debtor
to direct that all Proceeds of such Collateral be paid directly to the Secured Party or may permit
the Proceeds of such Collateral to be paid to Debtor and all such Proceeds consisting of cash,
checks, or near cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor in a separate deposit account containing only Proceeds and shall forthwith
upon receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any and all such Proceeds received by the Secured Party (whether from Debtor or
otherwise), shall be applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts</U>. If an Event of Default shall occur and be continuing, the
Secured Party may liquidate any securities held in any accounts of Debtor and apply the proceeds
thereof and any other amounts held in any accounts of Debtor as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral</U>. If an Event of Default shall occur and be continuing,
(a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral (including the originals of all or any Accounts and Account Records) or any part
thereof, from Debtor or any other Person which then has possession of any part thereof with or
without notice or judicial process, and for that purpose may enter upon Debtor&#146;s premises where any
of the Collateral is located and remove the same and may make reasonable use in connection
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">with such removal of any and all services, supplies, aids, and other facilities of Debtor, and (b)
upon three days&#146; notice to Debtor, Debtor shall, at its own expense, assemble the Collateral,
including, without limitation, the originals of all Account Records (or from time to time any
portion thereof) and make it available to the Secured Party by delivery to the Secured Party at any
location designated by the Secured Party which is reasonably convenient to both parties, whether at
the premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store
and keep any Collateral so assembled at such place or places pending further action by the Secured
Party and while the Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. Debtor&#146;s obligation to so assemble and deliver the Collateral is of
the essence of this Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by the
Debtor of such obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such
terms and conditions and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral may be sold,
leased, assigned, or options or contracts entered to do so, or otherwise disposed of, in the
condition in which the same existed when taken by the Secured Party or after any overhaul or
repair which may be commercially reasonable. Any such disposition which shall be a private sale or
other private proceeding shall be made upon not less than ten days&#146; written notice to Debtor
specifying the time after which such disposition is to be made and the intended sale price or
other consideration therefor. Any such disposition which shall be a public sale shall be made upon
not less than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially reasonable notice of such
auction. To the extent permitted by applicable law, the Secured Party may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to Debtor (except to the extent of surplus money received) as provided
below. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to
have credit on account of the purchase price thereof of amounts owing to such purchaser on account
of any of the Secured Obligations and any such purchaser may deliver notes, claims for interest,
or claims for other payment with respect to such Secured Obligations in lieu of cash up to the
amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such
notes, if the amount payable hereunder shall be less than the amount due thereon, shall be
returned to the holder thereof after being appropriately stamped to show partial payment.
Notwithstanding the foregoing, if the Collateral or any portion thereof is
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">perishable or threatens to decline speedily in value or is of a type customarily sold in a
recognized market only such notice as shall be reasonably practicable shall be required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in connection
with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses; Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys&#146; fees and legal expenses incurred by the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds</U>. The proceeds of any disposition of Collateral shall be
applied as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <I>first</I>, to payment or reimbursement of that portion of the Obligations constituting fees,
expenses and indemnities payable to the Agent in its capacity as such;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <I>second</I>, pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <I>third</I>, pro rata to payment of accrued interest on the Loans;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <I>fourth</I>, pro rata to payment of principal outstanding on the Loans and Obligations owed to
any Lender or affiliate of any Lender under any Commodity Hedge Agreement or Rate Management
Transaction;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <I>fifth</I>, pro rata to any other Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <I>sixth</I>, to serve as cash collateral to be held by the Agent to secure the LC Exposure; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <I>seventh</I>, any excess, after all of the Obligations shall have been indefeasibly
paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental
Authority.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral</U>. The Secured Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting willful misconduct and/or gross negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon all or any part of the Collateral or for any delay in
doing so or
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtor or otherwise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims</U>. Except as otherwise provided in this Agreement, Debtor
hereby waives, to the extent permitted by applicable law, notice of and judicial hearing in
connection with the Secured Party&#146;s taking possession or the Secured Party&#146;s disposition of any of
the Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;all damages occasioned by such taking of possession except any damages which are the
direct result of the willful misconduct and/or gross negligence of the Secured Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;all other requirements as to the time, place, and terms of sale or other requirements with
respect to the enforcement of the rights of the Secured Party hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;demand of performance or other demand, notice of intent to demand or accelerate, notice of
acceleration, presentment, protest, advertisement, or notice of any kind to or upon Debtor or any
other Person, except as may be required by the Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all rights of redemption, appraisement, valuation, diligence, stay, extension,
or moratorium now or hereafter in force under any applicable law in order to stay or delay the
enforcement of this Agreement, including the absolute sale of the Collateral or any portion
thereof, and Debtor, for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have instituted
any proceeding to enforce any right, power, or remedy under this Agreement by foreclosure, sale,
entry, or otherwise, and such proceeding shall have been discontinued or abandoned for any reason,
then and in every such case, Debtor and the Secured Party shall be returned to their former
positions and rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the Secured Party shall
continue as if no such proceeding had been instituted.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1
<U><B>INDEMNITY</B></U>. (a)&nbsp;<B> DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS&#146; FEES AND
EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED
&#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED</B>
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY
CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF
ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION,
THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO
SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING
FROM THE WILLFUL MISCONDUCT AND/OR GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any assertion that could
give rise to an Expense, Debtor shall assume full responsibility for the defense thereof. Without
limiting the application of part (a)&nbsp;of this Section, Debtor agrees to pay or reimburse such
Indemnitee on demand for any and all reasonable fees, costs, and expenses of whatever kind or
nature incurred in connection with the creation, preservation, or protection of the Secured Party&#146;s
Liens on, and security interests in, the Collateral, including, without limitation, all reasonable
fees and taxes in connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable expenses
incurred in the custody, preservation, use, or operation of the Collateral when Collateral is in
the Secured Party&#146;s possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured Party&#146;s interest
therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits, or proceedings arising out of or relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor agrees to
pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral: Survival</U>. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article&nbsp;VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1
<U>No Waiver, Remedies Cumulative</U>. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no course of dealing
between any Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. A waiver by the Secured Party of
any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Party would otherwise have on any future occasion. The rights and
remedies herein expressly provided are cumulative, may be exercised singly or concurrently and as
often and in such order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or now or hereafter
existing under applicable law. No notice to or demand on Debtor in any case shall entitle Debtor
to any other or further notice or demand in similar or other circumstances or constitute a waiver
of the rights of the Secured Party to any other or further action in any circumstances without
notice or demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2
<U>Termination, Release</U>. When the Secured Obligations have been indefeasibly paid and
performed in full and the Commitment has terminated, this Agreement shall terminate, and the
Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor the
proper instruments (including Uniform Commercial Code termination statements)
acknowledging the termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever, such of the
Collateral as may be in possession of the Secured Party and has not theretofore been disposed of,
applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the Secured
Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5
<U>Severability</U>. In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the original to
the extent permitted by applicable law.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications</U>. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall be in
writing (including by telecopy). Unless otherwise expressly provided herein, any such notice,
request, or communication shall be deemed to have been duly given or made when provided in
accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.
No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification, discharge,
or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U><B>Entire Agreement</B></U><B>. </B><FONT style="font-variant: SMALL-CAPS"><B>This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject hereof and shall supersede any prior
agreements, whether written or oral, between the Parties hereto relating to the subject hereof.
Furthermore, in this regard, this Agreement and the other written Loan Documents represent,
collectively, the final agreement among the Parties hereto and may not be contradicted by evidence
of prior, contemporaneous, or subsequent oral agreements of such Parties. There are no unwritten
oral agreements among such Parties.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U><B>Governing Law</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas (without giving effect to principles thereof relating to conflicts of laws).</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U><B>Jurisdiction and Venue</B></U>. <FONT style="font-variant: SMALL-CAPS"><B>All actions or proceedings with
respect to, arising directly or indirectly in connection with, out of, related to or from this
Agreement or any other Loan Document to which any Debtor is a Party may be
litigated at the sole discretion and election of the Secured Party,
in courts having situs in Dallas, Dallas County, Texax. Debtor hereby submits to the
jurisdiction of any local, state, or federal court located in Dallas, Dallas County,
Texas, and hereby waives any rights it may have to transfer or change the jurisdiction or venue of
any litigation brought against it by the Secured Party in accordance with this Section.</B></FONT>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>DEBTOR</B>:</U><BR>
<BR>
<B>SOUTHWEST OILFIELD CONSTRUCTION COMPANY</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President, Treasurer,
and <br>Chief
Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>

    <TD colspan="3" align="left"><U><B>SECURED PARTY</B>: </U><BR>
<BR>
<B>GUARANTY BANK, FSB</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="right"></TD>
    <TD>By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">  /s/ David M. Butler
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>    <TD align="left">&nbsp;</TD>

    <TD colspan="2" align="left">David M. Butler&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR><TR>
    <TD>&nbsp;</TD>    <TD align="left">&nbsp;</TD>

    <TD colspan="2" align="left">Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><U>EXHIBIT A</U></B>
</DIV>


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Section&nbsp;3.1:</TD>
    <TD>&nbsp;</TD>
    <TD>FILING LOCATIONS<br><br>
Secretary of State of Oklahoma</TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT B </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DESCRIPTION OF EQUIPMENT</B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">I.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>NEW 2006 REBEL EQUIPMENT, I.E. FALCON RIG MODEL SR -550, Double Drum Well Servicing Unit;
serial # to be issued when unit has been approved by governmental agencies. Including but not
limited to:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DRAW WORKS, i.e. Tubing Drum; Sandline Drum; Right Angle Gear Box; &#038; Auxiliary Brake;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>POWER SOURCE, i.e. Engine &#151; CAT Model C-15 ATAAC Engine Tier 3, 540 HP; Transmission,
i.e. Allison M561OA;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CARRIER, i.e. Rebel Equipment I-Beam with Eaton tandem front steering axles rated at
20,000# per axle, etc; Leveling Jacks (4); Hydraulic System (300 gallon tank with filtering
system); Air System (Engine driven 27 CFM air compressor, etc); Fuel Tanks (1 aluminum 150
gallon); Tool Boxes (two 18&#148;x24&#148;x36&#148;); Splash Cooling System (one 60 gallon tank);
Hydraulic Winch (Braden Model PD-12-C, 12,000#); Walkways and Handrails (with one ladder);
Work Platform (8&#146;x8&#146; with 2&#146; wings); Jack Stands (six i.e., 2 front, 2 for rear and 2 for
mast base screw jacks);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MAST, i.e. Rig Works Model 104-252 104&#146; high (252,000# hook load capacity on 8 lines,
225,000# hook load on 6 lines);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>PAINT, i.e. sandblasted and DuPont primer &#038; customer color, all as set forth below:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>

<TD width="5%" nowrap align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;<u>DRAWWORKS:</u></B></TD>
    <TD width="3%"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tubing Drum: </B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD>42&#148; X 12&#148; brake flanges, air and splash cooling,
conventional brake linkage system, Wichita 324 air clutch, 16&#148;
diameter barrel with Lebus 1&#148; grooving, hardened sprockets and
driven with 140 HS chain.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sandline Drum: </B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD>42&#148; X 8&#148; brake flanges, air and splash cooling,
conventional brake linkage system, Wichita 224 air clutch, 12 3/4&#148;
diameter barrel, hardened sprockets and driven with 140 HS chain,
drum capacity of 16,500&#146; of 9/1 6&#148; wireline.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Right Angle Gear Box: </B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD>Rebel fabricated oilbath 550 HP input rated driven by 1810
series drive train. Output hardened sprocket and 140 HS chain.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Auxiliary Brake: </B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD>(2)&nbsp;Two 48&#148; Kobelt air cooled disc brakes with (1)&nbsp;caliper per disc,
air controlled at operator&#146;s platform, complete with guard
and mounted on operator&#146;s side of drawworks.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>

<TD width="5%" nowrap align="left"><B>&nbsp;&nbsp;&nbsp;&nbsp;<u>POWER
SOURCE:</u></B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD><B>&nbsp;</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Engine: </B></TD>
    <TD width="3%">&nbsp;</TD>
    <TD>Caterpillar Model C-15 ATAAC Engine Tier 3 rated at 540 HP
at 2100 RPM. Complete with radiator, hydraulic power steering
pump, air inlet safety shut off assembly, transmission oil cooler
assembly, manual fuel primer pump assembly, 12 volt alternator, 27
air compressor, air governor assembly, engine mechanical gauge
cluster assembly, EMS ATI, data linkup, (2)&nbsp;two remote relay
control panel box assemblies (Primary &#151; main drum and
secondary</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-i<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#150; sand drum), cab dash panel gauge cluster and
instrumentation assembly, engine manual on/off switch
lock box assembly.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Transmission:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allison M5610A electronically controlled
transmission with drop box and two disconnects. CEC II
controls for the transmission are for automatic in road mode and power shift over
the well. Transmission has a safety lock out and cannot
be put in to road gear until transmission is in road mode
and brakes are released.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><u><B>CARRIER:</B>
</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rebel Equipment I-Beam construction with Eaton
tandem front steering axles rated at 20,000# per axle,
Rayco suspension, (4)&nbsp;four 445/65R22.5 tires, power
steering and ABS brakes. Eaton DP521 tandem rear drive
axles rated at 52,000#, Hendrickson suspension, (8)&nbsp;eight
11:00R22.5 tires, ABS brakes. Silent drive tag axle
with air lift and air retract suspension rated at 20,000#
with (4)&nbsp;11:00R22.5 tires.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Leveling Jacks:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(4)&nbsp;four hydraulic jacks, (2)&nbsp;two at front of
carrier and (2)&nbsp;at rear. </TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Hydraulic System:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">300 gallon tank complete with filtering system,
P-37 51 GPM at 1800 RPM pump driven by Chelsa PTO, air operated, complete with hoses, piping and control valves.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Air System:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Engine driven 27 CFM air compressor, AD-9 air
dryer, air supply tanks, hoses, piping and control
valves.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Fuel Tanks:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(1) one aluminum 150 gallon with hoses mounted under decking.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tool Boxes:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(2)&nbsp;two 18&#148; X 24&#148; X 36&#148; mounted under decking.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Splash Cooling System:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(1)&nbsp;one 60 gallon tank complete with regulator, hoses, piping and valves for tubing and sandline drums.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Hydraulic Winch:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Braden model PD-12-C 12,000# fast layer capacity
complete with hoses, piping and control valve, less
wireline.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Walkways &#038; Handrails:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extending from drawworks to operator&#146;s position with (1)&nbsp;one ladder and handrails to operator&#146;s platform.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Work Platform:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8&#146; Wide X 8&#146; Long with 2&#146; wing on both sides, Center slide, adjustable height.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Jack Stands:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(6)&nbsp;Six fabricated, (2)&nbsp;two for front leveling
jacks, (2)&nbsp;two for rear leveling jacks and (2)&nbsp;two for
mast base screw jacks.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><u><B>MAST:</B>
</u></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">RigWorks Model 104-252 104&#146; high. 252,000# hook
load capacity on (8)&nbsp;eight lines, 225,000# hook load
capacity on (6)&nbsp;lines, mast support stationary with
adjusting screws in well side mast legs. Mast legs are
made with rectangular tubing, (2)&nbsp;two hydraulic raising
and (1)&nbsp;telescoping cylinder, crown assembly including
(1)&nbsp;one 30&#148; 1&#148; grooved sheave, (4)&nbsp;four 24&#148; 1&#148; grooved
sheaves, (1)&nbsp;one 24&#148; 9/16&#148; sandline sheave and (2)&nbsp;two
catline sheaves.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->B-ii<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23.8
<SEQUENCE>11
<FILENAME>d44173exv10w23w8.htm
<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w23w8</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.23.8
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AMENDED AND RESTATED<BR>
SECURITY AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>EOWS MIDLAND COMPANY<BR>
(DEBTOR)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, AS AGENT<BR>
(SECURED PARTY)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DECEMBER 28, 2006</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 3px double #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="CENTER" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE I</TD>
    <TD colspan="1" valign="top" align="left">DEFINITIONS AND INTERPRETATION</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Credit Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE II</TD>
    <TD colspan="1" valign="top" align="left">GRANT OF SECURITY INTEREST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE III</TD>
    <TD colspan="1" valign="top" align="left">REPRESENTATIONS AND WARRANTIES</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Validity, Perfection and Priority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Liens; Other Financing Statements
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Location of Debtor and Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tradenames; Prior Names
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE IV</TD>
    <TD colspan="1" valign="top" align="left">COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Chief Executive Office
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Name or Corporate Structure
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title, Prohibited Liens and Filings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintain Records and Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Right of Inspection
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filings; Notifications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE V</TD>
    <TD colspan="1" valign="top" align="left">ACCOUNTS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor Remains Liable under Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collections on Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE VI</TD>
    <TD colspan="1" valign="top" align="left">POWER OF ATTORNEY</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment as Attorney-in-Fact
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Duty on the Part of Secured Party
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left" NOWRAP>ARTICLE VII&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">REMEDIES; RIGHTS UPON DEFAULT</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights and Remedies Generally
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proceeds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collection of Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor&#146;s Accounts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of the Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Recourse
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses; Attorneys&#146; Fees
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application of Proceeds
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Duties Regarding Preservation of Collateral
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Claims
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">7.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discontinuance of Proceedings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE VIII</TD>
    <TD colspan="1" valign="top" align="left">INDEMNITY</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">8.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">8.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnity Obligations Secured by Collateral; Survival
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="6" valign="top" align="left">ARTICLE IX</TD>
 <TD colspan="1" valign="top" align="left">MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Remedies Cumulative
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination; Release
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marshalling
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severability
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">9.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jurisdiction and Venue
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="LEFT" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>AMENDED AND RESTATED SECURITY AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <B>AMENDED AND RESTATED SECURITY AGREEMENT </B>(this &#147;Agreement&#148;), dated as of December
28, 2006, is by and between <B>EOWS MIDLAND COMPANY, </B>a Texas corporation (the &#147;Debtor&#148;) and <B>GUARANTY
BANK, FSB, </B>a federal savings bank as Agent for the benefit of the Lenders (&#147;<U>Secured Party</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>W I T N E S S E T H:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Amended and Restated Credit
Agreement dated December&nbsp;28, 2006, by and among Debtor and the Secured Party and the Lenders
signatory thereto (as amended, restated, or supplemented from time to time, the &#147;<U>Credit
Agreement</U>&#148;), the Secured Party and the Lenders have agreed to extend credit to or for the benefit
of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Debtor and Secured Party entered into a Security Agreement dated as of June&nbsp;6,
2006, and the parties hereto desire to amend and restate such Security Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party and the
Lenders to extend credit to or for the benefit of the Debtor pursuant to the Credit Agreement,
Debtor has agreed to execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above.</U> As used herein, each of the terms &#147;<U>Agreement</U>,&#148;
&#147;<U>Credit Agreement</U>,&#148; &#147;<U>Debtor</U>,&#148; and &#147;<U>Secured Party</U>&#148; shall have the meaning assigned to such term
hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Terms Defined in Credit Agreement.</U> Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Additional Defined Terms.</U> As used herein, each of the following terms shall have
the following meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Accounts</U>&#148; shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to Debtor (including,
without limitation, under any trade names, styles, or divisions thereto), whether
arising from the sale or lease of goods or the rendition of services or any other
transaction (including, without limitation, any such obligation which might be
characterized as an account, general intangible, other than contract rights under
contracts containing prohibitions against assignment of or the granting of a
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">security interest in the rights of a party thereunder, or chattel paper under the Uniform
Commercial Code in effect in any jurisdiction), and all rights of Debtor in, to, and under all
purchase orders now owned or hereafter received or acquired by it for goods or services, and all
rights of Debtor to any goods the sale or lease of which gave rise to any of the foregoing
(including, without limitation, returned or repossessed goods and rights of unpaid sellers), and
all moneys due or to become due to Debtor under all contracts for the sale or lease of goods or the
performance of services (whether or not earned by performance) or in connection with any other
transaction, now in existence or hereafter arising, including, without limitation, all collateral
security and guarantees of any kind given by any Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; shall mean each Person obligated on an Account, Chattel Paper, or
General Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Records</U>&#148; shall mean (a)&nbsp;all original copies of all documents, instruments,
or other writings evidencing the Accounts, (b)&nbsp;all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to the Accounts, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record
keeping systems, and other papers and documents relating to the Accounts, whether in the
possession or under the control of Debtor or any computer bureau or agent from time to time acting
for or on behalf of Debtor or otherwise, (c)&nbsp;all evidences of the filing of financing statements
and the registration of other instruments in connection therewith and amendments, supplements, or
other modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgements, or other writings, including, without limitation, lien search reports, from
filing or other registration offices, (d)&nbsp;all credit information, reports, and memoranda relating
thereto, and (e)&nbsp;all other written or non written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Chattel Paper</U>&#148; shall mean all chattel paper (as such term is defined in Section&nbsp;9 105(a)(2)
of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Equipment</U>&#148; shall mean all of Debtor&#146;s equipment (including, but not limited to that
described on Exhibit&nbsp;B attached hereto), as defined in Section&nbsp;9.102(a)(33) of the UCC, in any
form, whether now owned or hereinafter acquired and wherever located including all parts thereof
and all accessories or additions thereto, whether now owned or hereafter acquired.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General Intangibles&#148;</U> shall mean all general intangibles (as such term is defined in
Section&nbsp;9 106 of the UCC) of Debtor, including, without limitation, rights to the payment of
money (other than Accounts), net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment or grant of a
security interest by
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Debtor), federal income tax refunds, trade names, distributions on
certificated securities (as defined in &#167;8 102(a)(l) of the UCC) and uncertificated
securities (as defined in &#167;8 102(a)(2) of the UCC), computer programs and other
computer software, inventions, designs, trade secrets, goodwill, proprietary rights,
customer lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual interests
in trusts, credits with and other claims against any Person, together with any
collateral for any of the foregoing and the rights under any security agreement
granting a security interest in such collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnitees</U>&#148; shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeds</U>&#148; shall mean proceeds (as such term is defined in Section&nbsp;9 306(a) of the
UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</u>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;UCC&#148; shall mean the Uniform Commercial Code as in effect from time to time in the
State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4
<U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5
<U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148;
&#147;hereinafter,&#148; &#147;herein below,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular Article, Section, or
provision of this Agreement. References in this Agreement to Articles, Sections, or Exhibits are
to such Articles, Sections, or Exhibits of this Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6
<U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7
<U>Number and Gender</U>. Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined in
the singular or plural shall be equally applicable to the plural or singular, as the case may be,
unless otherwise indicated.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B><BR>
&nbsp;<BR>
<U><B>GRANT OF SECURITY INTEREST</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the &#147;<U>Collateral</U>&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Equipment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all General Intangibles; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the
foregoing, all substitutions and replacements for any or all of the
foregoing, and all Proceeds and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B><BR>
&nbsp;<BR>
<U><B>REPRESENTATIONS AND WARRANTIES</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>Validity, Perfection and Priority</U>. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as &#147;debtor&#148; and the Secured
Party as &#147;secured party&#148; and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority perfected security interests in all Collateral with respect to which a security
interest can be perfected by the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and clear
of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to cover any
of the Collateral is on file in any public office other than (i)&nbsp;financing statements in
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">favor of the Secured Party, (ii)&nbsp;financing statements for which proper termination statements have
been delivered to the Secured Party for filing, and (iii)&nbsp;financing statements filed in connection
with Permitted Liens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3
<U>Location of Debtor and Collateral</U>. The chief executive office of Debtor is located
at One Landmark Square, Stamford, Connecticut 06901. The primary copies of the Account Records
are located at, and all Accounts and General Intangibles are maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from, such chief
executive office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Accounts</U>. (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material respects, the
genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is and will be, in all material
respects, enforceable in accordance with its terms, (iii)&nbsp;is not and will not be subject to any
setoffs, defenses, taxes, counterclaims (except (A)&nbsp;with respect to refunds, returns, and
allowances in the ordinary course of business, and (B)&nbsp;to the extent that such Account may not yet
have been earned by performance), and (iv)&nbsp;is and will be, in all material respects, in compliance
with all applicable laws, whether federal, state, local, or foreign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Accounts which are evidenced by Chattel Paper require the consent of the Account
Debtor in respect thereof in connection with their assignment hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<U>Tradenames; Prior Names</U>. Debtor has not conducted business under any name other
than its current name during the last five years.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of
this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1
<U>Further Assurances</U>. At any time and from time to time, upon the request of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney, and other
documents, make such filings, give such notices, and take such further action as the Secured Party
may reasonably deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the filing of financing statements, in form acceptable to the Secured Party under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security
interests granted hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the performance of all searches of public records deemed necessary by the Secured Party to
establish and determine the priority of the security interests of the Secured Party or to determine
the presence or priority of other secured parties; and
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;the furnishing to the Secured Party from time to time of reports and schedules in
connection with the Collateral as required pursuant to the Credit Agreement, all in reasonable
detail and in form reasonably satisfactory to the Secured Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2
<U>Change of Chief Executive Office</U>. Debtor will not move its chief executive
office except to such new location as Debtor may establish in accordance with the last sentence of
this Section. The originals of all Account Records and General Intangibles will be kept at such
chief executive office or at the locations referred to in Section&nbsp;3.3, or at such new locations as
Debtor may establish in accordance with the last sentence of this Section. All Accounts, Account
Records, and General Intangibles of Debtor will be maintained at and controlled and directed
(including, without limitation, for general accounting purposes) from the locations referred to in
Section&nbsp;3.3 or such new locations as the Debtor may establish in accordance with the last sentence
of this Section. With respect to any new location, promptly upon the request of the Secured Party,
Debtor shall take all such action as the Secured Party may request to maintain the security
interest of the Secured Party in the Collateral granted hereby at all times fully perfected with
the same or better priority and in full force and effect. Debtor shall not establish a new location
for its chief executive office or such activities (or move any such activities from the locations
referred to in Section&nbsp;3.3) until it shall have given to the Secured Party not less than ten days&#146;
prior written notice of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Secured Party may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3
<U>Change of Name or Corporate Structure</U>. Debtor shall not change its name or
corporate structure or conduct business under any name other than its current name without giving
notice thereof to the Secured Party within ten days thereafter, clearly describing such new name,
or corporate structure or such new tradename and providing such other information in connection
therewith as the Secured Party may reasonably request. With respect to such new name, corporate
structure, or tradename, promptly upon the request of the Secured Party, Debtor shall take all such
action as the Secured Party may reasonably request to maintain the security interest of the Secured
Party in the Collateral granted hereby at all times fully perfected with the same or better
priority and in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
<U>Title, Prohibited Liens and Filings</U>. Debtor agrees to protect the title to the
Collateral. Debtor will not pledge, mortgage, otherwise encumber, create or suffer a Lien to
exist on any of the Collateral (other than in favor of the Secured Party) or sell, assign or
otherwise transfer any of the Collateral to or in favor of any Person other than the Secured Party
without the Secured Party&#146;s written consent. Debtor will not file or permit to be filed or recorded
any financing statement or other security instrument with respect to the Collateral other than in
favor of Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5
<U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause to be kept
and maintained, at its own cost and expense satisfactory and complete records of the Collateral,
including, but not limited to, the originals of all documentation with respect to all Accounts and
General Intangibles and records of all payments received and all credits granted on the Accounts,
all merchandise returned, and all other dealings therewith.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6
<U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to Debtor
have full and free access during normal business hours of Debtor to all the books,
correspondence, and records and Equipment of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make photocopies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
<U>Possession of Collateral</U>. The Collateral shall remain in Debtor&#146;s possession or
control at all times at Debtor&#146;s risk of loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8
<U>Financing Statement Filings; Notifications</U>. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief
place of business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts Records, or (iii)&nbsp;in the
&#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC, and (b)&nbsp;immediately notify
Secured Party of any change in Debtor&#146;s name. In any notice furnished pursuant to this Section,
Debtor will expressly state that the notice is required by this Agreement and contains facts that
will or may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U>ACCOUNTS</U></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1
<U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured Party),
Debtor shall remain liable under each of the Accounts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. The Secured Party shall have no obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Secured Party of any payment relating to such Account pursuant
hereto, nor shall the Secured Party be obligated in any manner to perform any of the obligations of
Debtor under or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any agreement giving
rise thereto), to present or file any claim, to take any action to enforce any performance, or to
collect the payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2
<U>Collections on Accounts</U>. Prior to the occurrence of an Event of Default, the
Secured Party hereby authorizes Debtor to collect the Accounts. At any time following and during
the continuance of any Event of Default, the Secured Party may curtail or terminate said authority
at any time and itself, or by its agents, collect all Accounts, and any payments of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts collected by Debtor shall be held by Debtor in trust for the Secured Party, segregated
from other funds of Debtor. All Proceeds, while held by the Secured Party (or by Debtor in trust
for the Secured Party) shall continue to be Collateral securing all of the Secured Obligations and
shall not constitute payment thereof until applied as hereinafter provided.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1
<U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time in the discretion
of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of
the foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor,
without notice to or assent by the Debtor, to do the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;in the case of any Account, at any time when the authority of Debtor to collect the
Accounts has been curtailed or terminated pursuant hereto, or in the case of any other Collateral,
at any time when any Event of Default shall have occurred and be continuing, in the name of Debtor
or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts,
notes, acceptances, or other instruments for the payment of moneys due under, or with respect to,
any Collateral; in the name of Debtor or otherwise to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand for, collect,
receive payment of, and receipt for, any and all moneys, claims, and other amounts due or to become
due at any time in respect of or arising out of any Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to prepare,
sign, and file financing statements and amendments thereto in the name of Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to take or
cause to be taken all actions necessary to perform or comply or cause performance or compliance
with the terms of this Agreement, including, without limitation, actions to pay or discharge taxes
and Liens levied or placed on or threatened against the Collateral, to effect any repairs or obtain
any insurance called for by the terms of this Agreement, and to pay all or any part of the premiums
therefor and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;upon the occurrence and during the continuance of any Event of Default, (i)&nbsp;to sign and
indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtor, assignments, verifications, notices, and other documents in connection with
any of the Collateral, (ii)&nbsp;to commence and prosecute any suits, actions, or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral, (iii)&nbsp;to defend any
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">suit, action, or proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to settle,
compromise, or adjust any suit, action, or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as the Secured Party may deem
appropriate, and (v)&nbsp;generally, to sell or transfer and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the Secured Party were
the absolute owner thereof for all purposes, and to do, at the option of the Secured Party and the
expense of Debtor, at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve, or realize upon the Collateral and the Liens of the Secured
Party thereon and to effect the intent of this Agreement, all as fully and effectively as Debtor
might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;at any time when an Event of Default shall have occurred and be continuing, to execute,
in connection with any foreclosure, any endorsements, assignments, or other instruments of
conveyance or transfer with respect to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or
failure to act hereunder.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U>REMEDIES; RIGHTS UPON DEFAULT</U></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed to in
any way limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Proceeds</U>. If an Event of Default shall occur and be continuing, in addition to the
rights of the Secured Party specified with respect to the payment of Accounts, (a)&nbsp;all Proceeds
received by Debtor consisting of cash, checks, and other near cash items shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Collection of Accounts</U>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may instruct the obligor or obligors on any obligation owing or
purporting to be owed to Debtor constituting the Collateral (including, without limitation, the
Accounts) to make any payment required by the terms of such obligation directly to the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the Secured Party shall have the right from time to time to modify (including, without
limitation, to extend the time for payment or arrange for payment in installments) or waive
rights under any such obligation and to compromise or settle counterclaims or setoffs
with the obligor under any such obligation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any and all of such proceeds of such collections paid to the Secured Party, or any part
thereof, (after deduction of the Secured Party&#146;s expenses of collection, including, without
limitation, reasonable attorneys&#146; fees and disbursements), shall be applied by the Secured Party as
provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Disposition of Collateral</U>. If an Event of Default shall occur and be continuing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the Secured Party may direct Debtor to sell, assign, or otherwise liquidate or dispose of
all or from time to time any portion of the Collateral, and Debtor shall do so, and the Secured
Party may take possession of the Proceeds of such Collateral. The Secured Party may direct Debtor
to direct that all Proceeds of such Collateral be paid directly to the Secured Party or may permit
the Proceeds of such Collateral to be paid to Debtor and all such Proceeds consisting of cash,
checks, or near cash items shall be held by Debtor in trust for the Secured Party, segregated from
other funds of Debtor in a separate deposit account containing only Proceeds and shall forthwith
upon receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by Debtor to the order of the Secured Party or in such other
manner as shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any and all such Proceeds received by the Secured Party (whether from Debtor or
otherwise), shall be applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts</U>. If an Event of Default shall occur and be continuing, the
Secured Party may liquidate any securities held in any accounts of Debtor and apply the proceeds
thereof and any other amounts held in any accounts of Debtor as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral</U>. If an Event of Default shall occur and be continuing,
(a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral (including the originals of all or any Accounts and Account Records) or any part
thereof, from Debtor or any other Person which then has possession of any part thereof with or
without notice or judicial process, and for that purpose may enter upon Debtor&#146;s premises where any
of the Collateral is located and remove the same and may make reasonable use in connection
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">with such removal of any and all services, supplies, aids, and other facilities of Debtor, and (b)
upon three days&#146; notice to Debtor, Debtor shall, at its own expense, assemble the Collateral,
including, without limitation, the originals of all Account Records (or from time to time any
portion thereof) and make it available to the Secured Party by delivery to the Secured Party at any
location designated by the Secured Party which is reasonably convenient to both parties, whether at
the premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store
and keep any Collateral so assembled at such place or places pending further action by the Secured
Party and while the Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. Debtor&#146;s obligation to so assemble and deliver the Collateral is of
the essence of this Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by the
Debtor of such obligation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral</U>. If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such
terms and conditions and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral may be sold,
leased, assigned, or options or contracts entered to do so, or otherwise disposed of, in the
condition in which the same existed when taken by the Secured Party or after any overhaul or
repair which may be commercially reasonable. Any such disposition which shall be a private sale or
other private proceeding shall be made upon not less than ten days&#146; written notice to Debtor
specifying the time after which such disposition is to be made and the intended sale price or
other consideration therefor. Any such disposition which shall be a public sale shall be made upon
not less than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially
reasonable) specifying the time and place of such sale and, in the absence of applicable
requirements of law to the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially reasonable notice of such
auction. To the extent permitted by applicable law, the Secured Party may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to Debtor (except to the extent of surplus money received) as provided
below. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to
have credit on account of the purchase price thereof of amounts owing to such purchaser on account
of any of the Secured Obligations and any such purchaser may deliver notes, claims for interest,
or claims for other payment with respect to such Secured Obligations in lieu of cash up to the
amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such
notes, if the amount payable hereunder shall be less than the amount due thereon, shall be
returned to the holder thereof after being appropriately stamped to show partial payment.
Notwithstanding the foregoing, if the Collateral or any portion thereof is
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">perishable or threatens to decline speedily in value or is of a type customarily sold in a
recognized market only such notice as shall be reasonably practicable shall be required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse</U>. Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in
connection with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses: Attorneys&#146; Fees</U>. Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys&#146; fees and legal expenses incurred by the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds</U>. The proceeds of any disposition of Collateral shall be
applied as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<I>first, </I>to payment or reimbursement of that portion of the Obligations constituting fees,
expenses and indemnities payable to the Agent in its capacity as such;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<I>second, </I>pro rata to payment or reimbursement of that portion of the Obligations
constituting fees, expenses and indemnities payable to the Lenders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<I>third, </I>pro rata to payment of accrued interest on the Loans;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<I>fourth, </I>pro rata to payment of principal outstanding on the Loans and Obligations owed to
any Lender or affiliate of any Lender under any Commodity Hedge Agreement or Rate Management
Transaction;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<I>fifth, </I>pro rata to any other Obligations;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<I>sixth, </I>to serve as cash collateral to be held by the Agent to secure the LC Exposure; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<I>seventh, </I>any excess, after all of the Obligations shall have been indefeasibly
paid in full in cash, shall be paid to the Borrower or as otherwise required by any Governmental
Authority.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral</U>. The Secured Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting willful misconduct and/or gross negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims</U>. Except as otherwise provided in this Agreement, Debtor
hereby waives, to the extent permitted by applicable law, notice of and judicial hearing in
connection with the Secured Party&#146;s taking possession or the Secured Party&#146;s disposition of any of
the Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;all damages occasioned by such taking of possession except any damages which are the
direct result of the willful misconduct and/or gross negligence of the Secured Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;all other requirements as to the time, place, and terms of sale or other requirements with
respect to the enforcement of the rights of the Secured Party hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;demand of performance or other demand, notice of intent to demand or accelerate, notice of
acceleration, presentment, protest, advertisement, or notice of any kind to or upon Debtor or any
other Person, except as may be required by the Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all rights of redemption, appraisement, valuation, diligence, stay,
extension, or moratorium now or hereafter in force under any applicable law in order to stay or
delay the enforcement of this Agreement, including the absolute sale of the Collateral or any
portion thereof, and Debtor, for itself and all who may claim under it, insofar as it or they now
or hereafter lawfully may, hereby waives the benefit of all such laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings</U>. In case the Secured Party shall have instituted
any proceeding to enforce any right, power, or remedy under this Agreement by foreclosure, sale,
entry, or otherwise, and such proceeding shall have been discontinued or abandoned for any reason,
then and in every such case, Debtor and the Secured Party shall be returned to their former
positions and rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the Secured Party shall
continue as if no such proceeding had been instituted.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U><B>INDEMNITY</B></U>. (a)&nbsp;<B>DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS&#146; FEES AND
EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE FOREGOING ARE COLLECTIVELY CALLED
&#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY
ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS
EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONNECTED WITH THE ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF
ANY OF THE TERMS OF OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION,
THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO
SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING
FROM THE WILLFUL MISCONDUCT AND/OR GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Debtor agrees that upon written notice by any such Indemnitee of any assertion that could
give rise to an Expense, Debtor shall assume full responsibility for the defense thereof. Without
limiting the application of part (a)&nbsp;of this Section, Debtor agrees to pay or reimburse such
Indemnitee on demand for any and all reasonable fees, costs, and expenses of whatever kind or
nature incurred in connection with the creation, preservation, or protection of the Secured Party&#146;s
Liens on, and security interests in, the Collateral, including, without limitation, all reasonable
fees and taxes in connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable expenses
incurred in the custody, preservation, use, or operation of the Collateral when Collateral is in
the Secured Party&#146;s possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured Party&#146;s interest
therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits, or proceedings arising out of or relating to the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor agrees to
pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral: Survival</U>. Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article&nbsp;VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>No Waiver; Remedies Cumulative</U>. No failure or delay on the part of the Secured
Party in exercising any right, power, or privilege hereunder and no course of dealing between any
Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or partial
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege. A waiver by the Secured Party of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy
which the Secured Party would otherwise have on any future occasion. The rights and remedies herein
expressly provided are cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights or remedies which
the Secured Party would otherwise have whether by agreement or now or hereafter existing under
applicable law. No notice to or demand on Debtor in any case shall entitle Debtor to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of
the Secured Party to any other or further action in any circumstances without notice or demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Termination; Release</U>. When the Secured Obligations have been indefeasibly paid and
performed in full and the Commitment has terminated, this Agreement shall terminate, and the
Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor the
proper instruments (including Uniform Commercial Code termination statements)
acknowledging the termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever, such of the
Collateral as may be in possession of the Secured Party and has not theretofore been disposed of,
applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling</U>. The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the Secured
Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Severability</U>. In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing</U>. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the original to
the extent permitted by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications</U>. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall be in
writing (including by telecopy). Unless otherwise expressly provided herein, any such notice,
request, or communication shall be deemed to have been duly given or made when provided in
accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest</U>. This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments</U>. Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification, discharge,
or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <B><U>Entire Agreement</U>.</B> <FONT style="font-variant: SMALL-CAPS"><B>This Agreement constitutes the entire Agreement
between the Parties hereto with respect to the subject hereof and shall supersede any prior
agreements, whether written or oral, between the Parties hereto relating to the subject hereof.
Furthermore, in this regard, this Agreement and the other written Loan Documents represent,
collectively, the final agreement among the Parties hereto and may not be contradicted by evidence
of prior, contemporaneous, or subsequent oral agreements of such Parties. There are no unwritten
oral agreements among such Parties.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <B><U>Governing Law</U>.</B> <FONT style="font-variant: SMALL-CAPS"><B> This Agreement shall be governed by and construed in
accordance with the Laws of the State of Texas (without giving effect to principles thereof
relating to conflicts of laws).</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <B><U>Jurisdiction and Venue</U>.</B>  <FONT style="font-variant: SMALL-CAPS"><B>All actions or proceedings with respect to,</B></FONT>
<B>ARISING DIRECTLY OF INDIRECTLY IN CONNECTION WITH, OUT OF RELATED
TO OR FROM THIS</B>
<FONT style="font-variant: SMALL-CAPS"><B>Agreement or any other Loan Document to which any Debtor is</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>a Party may be
litigated At the</b></FONT><b> SOLE</b><FONT style="font-variant: SMALL-CAPS"><B> discretion and election of the Secured Party, in courts having situs in
Dallas, Dallas County, Texas. Debtor hereby submits to the jurisdiction of any local, state, or
federal court located in Dallas, Dallas County, Texas, and hereby waives any rights it may have to
transfer or change the jurisdiction or venue of any litigation brought against it by the Secured
Party in accordance with this Section.</B></FONT>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>DEBTOR:</B></U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>EOWS MIDLAND COMPANY</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Beverly A. Cummings
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Treasurer, and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>SECURED PARTY:</B></U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>GUARANTY BANK, FSB</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ David M. Butler
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
David M. Butler
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT A</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;3.1:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FILING LOCATIONS</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary of State of Texas</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">A-i
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT B </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DESCRIPTION OF EQUIPMENT</B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">I.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mustang 550-C Rig described as:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Carrier is S/N RW 550-104</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Draw Works is S/N DD 550-104</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mast is S/N RW 96-104</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See Price Quotation below for further description:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>RIG WORKS MODEL</B></U><BR>
Mustang <U>550-C-</U>Series<BR> Self-Propelled
Service<BR> Rig Carrier, 5 Axle, <U><B>13&#146;6&#148; road
ht.</B></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>RIG WORKS MODEL</B></U><BR>
Mustang 550 Series<BR>
double drum draw works,<BR>
46 x 10 main drum ass&#146;y,<BR>
21.250&#148; O.S. main drum spool diameter,<BR>
35&#148; wide, w/ Lebus grooving f/ 1&#148; line,<BR>
Twin Disc P.O. 324 clutch,<BR>
46 x 08 sandline drum ass&#146;y,<BR>
open loop splash water cooling,<BR>
central lubrication with 14&#148; O.S.<BR>
drum barrel, Twin Disc P.O. 124<BR>
clutch w/ 16,500&#146; capacity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>OPERATOR CONTROLS</B></U><BR>
Operator friendly control consoles<BR>
conveniently located @ rear of carrier<BR>
f/ main drum operation &#038; near sandline<BR>
for sandline operation.<BR>
Common pneumatic control valves are used in panels.<BR>
Engine emergency shutdown switches are housed in same.<BR>
Mechanical brakes controls are located near consoles.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>ASSIST BRAKE</B></U><BR>
Parmac 202 brake will be installed <BR>complete with
clutch, piping, reservoir &#038; <BR>controls @ operator
console.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>BRAKE SPLASH</B></U> <BR>
60 gallon tank w/ plumbing to brake <BR>rims @ bath
drums &#038; remote controls @<BR> operator&#146;s stations.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">B-i
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>DIESEL ENGINE</B></U><BR>
Detroit Diesel Series &#147;60&#148;,<BR> DDEC, Tier 3
emissions,<BR> 14 Liter, up to 500 hp complete w/<BR>
radiator, muffler, air cleaner, hood,<BR> batteries
p.s. pump.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>TRANSMISSION</B></U><BR>
Allison Automatic, max. 500HP input,<BR>model
M5610 H-2 w/ electronic <BR>shift, cab &#038; rear mounted
controls.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>HYDRAULIC SYSTEM</B></U><BR>
Gear pump rated @ 65 GPM @ 2150 <BR>PSI intermittent operation with
pump, <BR>relief valves, by-pass valve, tong selector valve, <BR>rig up/down
controls, reservoir, filtration, <BR>plumbed pump to rear to tank.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>CARRIER</B></U> <BR>
5 Axle H.D. fabricated steel carrier with <BR>lights for reading, tandem
22,000# steering <BR>axles, tandem 44,000# drive <BR>axles, single 25,000# <BR>tag
axle, all axles with suspension;<BR> steering-spring drive-Hendrickson,
tag-air.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>CAB</B></U><BR>
Complete with air ride seat, safety seat belt,<BR>
safety glass, windshield wiper/washer, dual O.S. mirrors,<BR>
heater/defroster, hydraulic power assist steering controls,<BR>
carrier brakes controls, engine throttle controls,<BR>
engine start/kill controls, instrument panel, 12 volt lighting.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>FUEL TANK</B></U> <BR>
(1) &#151; 110 gallon fuel reservoir.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>TOOL BOXES</B></U><BR>
(2) &#151;  18&#148; W x 18&#148;T x 48&#148; L Boxes, horizontal below deck.<BR>
(1) &#151; 18&#148; D x 36&#148; T x 40&#148; W Vertical, above deck.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>HYDRAULIC JACKS</B></U><BR>
(4) &#151; Hydraulic Jacks w/ mechanical lock nuts, with stands;<BR>
(2) &#151; near steering axles;<BR>
(2) &#151; near rear bumper for leveling rig carrier.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>HANDLING WINCH</B></U><BR>
Braden PD12 hydraulic planetary winch with man-lift capability</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">B-ii
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>15.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>HINGED WALKWAYS</B></U><BR>
30&#148; wide hinged walkways from engine, operator side, <BR>front of draw
works to rear w/ 42&#148; T hinged handrails.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>16.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>TIRES</B></U><BR>
Steering: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)&nbsp;445/65 R 22.5<BR>
Drive: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (8)&nbsp;11: R 24.5<BR>
Tag: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)&nbsp;11: R 24.5</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>17.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>MAST</B></U> <BR>
Designed to meet A.P.I. Spec. 4F, with finite analysis performed by a
Professional Engineer, A.P.I. monogram pending, all welding procedures
are certified, welders are qualified, certified materials are tracked.
104&#146; T x 252,000# Hook Load Tubular Steel Mast. Hydraulically Raised
&#038; Telescoped, Constructed in (3)&nbsp;main sections: Base; Lower, Upper.
Rod Basket w/ spacing for 1.250 rods on operator side &#038; standard 1&#148;
spacing @ offside hanger, fully automatic positioning.
Tubing Board w/ 20,000&#146; of 2-7/8&#148;
E.U.E. racking capacity with end lock, fully automatic, w/escape way @
rear hinged gate.
(5)&nbsp;sheave main line crown block with additional (1)&nbsp;sandline sheave.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>18.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B>PAINT</B></U> <BR>
Rig to be painted max. (2)&nbsp;colors with polyurethane enamels applied over zinc type
base coats.<BR>
Mast to be (1)&nbsp;primary color with contrasting crown with polyurethane topcoats applied over
base zinc coat.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt">B-iii
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>12
<FILENAME>d44173exv10w25.htm
<DESCRIPTION>CREDIT AGREEMENT - PRIMEENERGY CORPORATION
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w25</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.25
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CREDIT AGREEMENT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Dated as of June&nbsp;1, 2006</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(but effective for all purposes as of August&nbsp;22, 2005)</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Between</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRIME OFFSHORE L.L.C.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>as Borrower</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>and</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRIMEENERGY CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>as Lender</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>$40,000,000</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE I<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Definitions and Accounting Matters<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;1.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;1.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain Defined Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;1.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounting Terms and Determinations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE II<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Revolving Credit Borrowing Base<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;2.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Borrowing Base</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;2.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Note</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;2.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Borrowing Base Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;2.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Request for Loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;2.05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Funding of Loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE III<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Payments of Principal and Interest<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;3.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Repayment of Loans and Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;3.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;3.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prepayments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;3.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Conversion</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE IV<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Payments; Computations; Etc.<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;4.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;4.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taxes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE V<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Conditions Precedent<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;5.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Execution of Documentation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;5.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Conditions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE VI<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Representations and Warranties<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Existence</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Condition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Breach</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approvals</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Use of Loan Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->i<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Misstatements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.09</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Defaults</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with the Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;6.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Titles, etc</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE VII<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Affirmative Covenants<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance, Etc</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Performance of Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taxes and Other Liens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Laws</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.09</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Liens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;7.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Adequate Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE VIII<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Negative Covenants<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Amendments of Organizational Documents</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Use of Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sale of Assets, Consolidation, Merger, Dissolution, Etc</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indebtedness</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Negative Pledge Clauses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investments, Loans and Advances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dividends, Distributions and Redemptions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.09</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nature of Business</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;8.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transactions with Affiliates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE IX<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Events of Default; Remedies<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;9.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Events of Default</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;9.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Remedies</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">ARTICLE X<BR></TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" align="center">Miscellaneous<BR></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.01</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.02</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Expenses, Indemnities, Etc</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.04</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments, Etc</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.05</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Successors and Assigns</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->ii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Invalidity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.09</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Captions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Oral Agreements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;10.14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exhibit&nbsp;A</DIV></TD>
    <TD align="left">&#150;</TD>
    <TD align="left" valign="top">Form of Note</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exhibit&nbsp;B</DIV></TD>
    <TD align="left">&#150;</TD>
    <TD align="left" valign="top"> Form of Borrowing Request</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->iii<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>CREDIT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS CREDIT AGREEMENT, </B>dated as of June&nbsp;1, 2006, but effective for all purposes as of August
22, 2005 (the &#147;Effective Date&#148;) is between PRIME OFFSHORE L.L.C., a Delaware limited liability
company (the &#147;<U>Borrower</U>&#148;), and PRIMEENERGY CORPORATION, a Delaware corporation (the
&#147;<U>Lender</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>R E C I T A L S</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;The Borrower has requested that the Lender provide certain loans to the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;The Lender has agreed to make such loans subject to the terms and conditions of this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;In consideration of the mutual covenants and agreements herein contained and of the loans
and commitments hereinafter referred to, the parties hereto agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I<BR>
Definitions and Accounting Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.01 <U>Terms Defined Above</U>. As used in this Agreement, the terms
&#147;<U>Borrower</U>&#148; and &#147;<U>Lender</U>&#148; shall have the meanings indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.02 <U>Certain Defined Terms</U>. As used herein, the following terms shall have
the following meanings (all terms defined in this Article&nbsp;I or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural and vice versa):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; of any Person shall mean (i)&nbsp;any Person directly or indirectly controlled
by, controlling or under common control with such first Person, (ii)&nbsp;any director or officer of
such first Person or of any Person referred to in clause (i)&nbsp;above and (iii)&nbsp;if any Person in
clause (i)&nbsp;above is an individual, any member of the immediate family (including parents, spouse
and children) of such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by any such member
or trust. As used in this definition, any Person that owns directly or indirectly 10% or more of
the securities having ordinary voting power for the election of directors or other governing body
of a corporation or 10% or more of the partnership or other ownership interests of any other
Person (other than as a limited partner of such other Person) will be deemed to &#147;control&#148;
(including, with its correlative meanings, &#147;<U>controlled by</U>&#148; and &#147;<U>under common control
with</U>&#148;) such corporation or other Person. For purposes of this Agreement, the Borrower shall
not be considered an Affiliate of Lender and vice versa.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Agreement</U>&#148; shall mean this Credit Agreement, as the same may from time to time be
amended or supplemented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Base Amount</U>&#148; shall mean the maximum amount of credit the Lender, in its
sole discretion and determination, is willing to loan and have outstanding to Borrower in
accordance with Section&nbsp;2.03.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Request</U>&#148; shall mean a request by the Borrower for a Loan in accordance
with Section&nbsp;2.04 and substantially in the form of Exhibit&nbsp;B.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; shall mean any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Capital Stock</U>&#148; shall mean any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Change of Control</U>&#148; shall mean when any Person and its Affiliates (or a group of
Persons otherwise acting in concert), other than the Members (as defined in the Limited Liability
Company Agreement of the Borrower) of the Borrower as of the date hereof (together with their
permitted transferees who are Affiliates of such Members as of the date hereof), acquire more than
50% of the Capital Stock of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Code</U>&#148; shall mean the Internal Revenue Code of 1986, as amended from time to time and
any successor statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Date</U>&#148; shall mean the date of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Debt</U>&#148; shall mean, for any Person the sum of the following (without duplication): (i)
all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments (including principal, interest, fees and charges); (ii)&nbsp;all obligations of such
Person (whether contingent or otherwise) in respect of bankers&#146; acceptances, letters of credit,
surety or other bonds and similar instruments; (iii)&nbsp;all obligations of such Person to pay the
deferred purchase price of Property or services (other than for borrowed money); (iv)&nbsp;all
obligations under leases which shall have been, or should have been, in accordance with GAAP,
recorded as capital leases in respect of which such Person is liable (whether contingent or
otherwise); (v)&nbsp;all obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination, which are substantially
equal to at least 80% of the purchase price of the Property subject to such lease plus interest as
an imputed rate of interest; (vi)&nbsp;all Debt and other obligations of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person; (vii)&nbsp;all Debt (as
described in the other clauses of this definition) and other obligations of others guaranteed by
such Person or in which such Person otherwise assures a creditor against loss of the Debtor or
obligations of others; (viii)&nbsp;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; (ix)&nbsp;any Capital Stock of such Person which such Person has a mandatory obligation to
redeem such stock; (x)&nbsp;obligations to deliver goods or services in consideration of advance
payments; (xi)&nbsp;obligations to pay for goods or services whether or not such goods or services are
actually received or utilized by such Person; and (xii)&nbsp;all obligations of such Person under
Hedging Agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default</U>&#148; shall mean an Event of Default or an event that with notice or lapse of
time or both would become an Event of Default.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dollars</U>&#148;
and &#147;<U>$</U>&#148; shall mean lawful money of the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Effective Rate</U>&#148; shall mean the rate per annum (expressed as a percentage) published
by Federal National Mortgage Association as the one month London Interbank Offered Rate (LIBOR)
for the previous month, plus four percent (4%), but in no event exceeding the Highest Lawful Rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental Laws</U>&#148; shall mean any and all Governmental Requirements pertaining to
health or the environment in effect in any and all jurisdictions in which the Borrower is
conducting or at any time has conducted business, or where any Property of the Borrower is
located, including without limitation, the Oil Pollution Act of 1990
(&#147;<U>OPA</U>&#148;), the Clean Air Act,
as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
(&#147;<U>CERCLA</U>&#148;), 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
(&#147;<U>RCRA</U>&#148;), 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 laws.
The term &#147;oil&#148; shall have the meaning specified in OPA, the terms &#147;hazardous substance&#148; and
&#147;release&#148; (or &#147;threatened release&#148;) have the meanings specified in CERCLA, and the terms &#147;solid
waste&#148; and &#147;disposal&#148; (or &#147;disposed&#148;) have the meanings specified in RCRA; provided, however, that
(i)&nbsp;in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply on and subsequent to the effective date of such
amendment and (ii)&nbsp;to the extent the laws of the state in which any Property of any of the
Borrower is located establish a meaning for &#147;oil,&#148; &#147;hazardous substance,&#148; &#147;release,&#148; &#147;solid waste&#148;
or &#147;disposal&#148; which is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>ERISA</U>&#148; shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event of Default</U>&#148; shall have the meaning assigned such term in Section&nbsp;9.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&#147;Excepted Liens</U>&#148; shall mean Liens for taxes, assessments or other governmental
charges or levies not yet due or which are being contested in good faith by appropriate action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Final Maturity Date</U>&#148; shall mean the earliest of (i)&nbsp;thirty days following receipt by
the Borrower of written notice from the Lender demanding payment of all Indebtedness, (ii)&nbsp;the
date on which the Loans are declared due and payable pursuant to Section&nbsp;9.02 or (iii)&nbsp;December
15, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; shall mean generally accepted accounting principles in the United States of
America in effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental Authority</U>&#148; shall include the country, the state, county, city and
political subdivisions in which any Person or such Person&#146;s Property is located or which exercises
valid jurisdiction over any such Person or such Person&#146;s Property, and any court, agency,
department,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">commission, board, bureau or instrumentality of any of them including monetary authorities that
exercises valid jurisdiction over any such Person or such Person&#146;s Property. Unless otherwise
specified, all references to Governmental Authority herein shall mean a Governmental Authority
having jurisdiction over, where applicable, the Borrower or any of its Property or the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental Requirement</U>&#148; shall mean 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),
including, without limitation, ERISA, the Code and Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental Authority.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Hedging Agreements</U>&#148; shall mean any commodity, interest rate or currency swap, cap,
floor, collar, forward agreement or other exchange or protection agreements or any option with
respect to any such transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Highest Lawful Rate</U>&#148; shall mean the maximum nonusurious interest rate, if any, that
at any time or from time to time may be contracted for, taken, reserved, charged or received on
the Note or on other Indebtedness under laws applicable to the Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indebtedness</U>&#148; shall mean any and all amounts owing or to be owing by the Borrower to
the Lender in connection with the Loan Documents and all renewals, extensions and/or
rearrangements of any of the above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnified Parties</U>&#148; shall have the meaning assigned such term in Section&nbsp;10.03(b).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnity Matters</U>&#148; shall mean any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, demands and causes of action made or threatened
against a Person and, in connection therewith, all losses, liabilities, damages or reasonable
costs and expenses of any kind or nature whatsoever incurred by such Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Lien</U>&#148; shall mean 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 (i)&nbsp;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. The term &#147;<U>Lien</U>&#148; shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purposes of this Agreement, the
Borrower 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loans</U>&#148; shall mean the loans as provided for by Section&nbsp;2.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Documents</U>&#148; shall mean this Agreement, the Security Agreement and the Note.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Effect</U>&#148; shall mean any condition or circumstance that would
materially and adversely affect (i)&nbsp;the assets, liabilities, financial condition, business or
operations of the Borrower as compared to the status of same as of the Closing Date, or (ii)&nbsp;the
ability of the Borrower to carry out its business as conducted at the Closing Date or as proposed
as of the Closing Date to be conducted or (iii)&nbsp;the ability of the Borrower to meet its
obligations under the Loan Documents on a timely basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Note</U>&#148; shall mean the note provided for by Section&nbsp;2.02, together with any and all
renewals, extensions for any period, increases, rearrangements, substitutions or modifications
thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Organizational Documents</U>&#148; shall have the meaning assigned in Section&nbsp;6.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; shall mean any individual, corporation, limited liability company, voluntary
association, partnership, joint venture, trust, unincorporated organization or government or any
agency, instrumentality or political subdivision thereof, or any other form of entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Property</U>&#148; shall mean any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Responsible Officer</U>&#148; shall mean, with respect to the Borrower, such individual(s) as
the Borrower may from time to time designate is writing as a &#147;Responsible Officer&#148; for purposes of
this Agreement. Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>SEC</U>&#148; shall mean the Securities and Exchange Commission or any successor Governmental
Authority.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Security Agreement</U>&#148; shall mean the security agreement, mortgage or similar agreement
executed by the Borrower in favor of the Lender covering all assets of the Borrower described
therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; shall mean, with respect to any Person, any other Person of which at
least a majority of the outstanding equity interests having by the terms thereof ordinary voting
power to elect a majority of the board of directors, managers or similar governing body with
responsibility for the oversight of the management and operations of such other 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 such first Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.03 <U>Accounting Terms and Determinations</U>. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, in accordance with GAAP.
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II<BR>
Revolving Credit Borrowing Base</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.01 <U>Borrowing Base</U>. The Lender may at its sole discretion and subject to the
terms of this Agreement, to make Loans to the Borrower on the Closing Date and on any date prior
to Final Maturity Date up to the Borrowing Base Amount. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.02 <U>Note</U>. The Loans shall be evidenced by a single promissory note of the
Borrower in the original principal amount of $40,000,000 in substantially the form of Exhibit&nbsp;A
hereto, dated as of the Closing Date, payable to the order of the Lender and otherwise duly
completed. The date and amount of the Loans, and all payments made on account of the principal
thereof, shall be recorded by the Lender on its books for the Note and, prior to any transfer, may
be endorsed by the Lender on a schedule attached to such Note or on any separate record maintained
by the Lender. Failure to make any such notation or attach a schedule shall not affect the
Lender&#146;s or the Borrower&#146;s rights or obligations in respect of the Loans or affect the validity of
such transfer by the Lender of the Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.03 <U>Borrowing Base Amount</U>. The initial Borrowing Base Amount shall be
$40,000,000, but may at any time at the sloe discretion of the Lender be redetermined to any
amount not less than the current outstanding balance and indebtedness, and shall be subject to
reduction in accordance with Section&nbsp;3.04.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.04 <U>Request for Loans</U>. To request a Loan, the Borrower shall notify the
Lender of such request by telephone not later than 11:00&nbsp;a.m., Houston, Texas time, two Business
Days before the date of the proposed borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Lender of a
written Borrowing Request in the form of Exhibit&nbsp;B, signed by a Responsible Officer of the
Borrower. Each such telephonic and written Borrowing Request shall specify the following
information:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;the aggregate amount of the requested Loan, which shall not be less than $100,000;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;the date of such Loan, which shall be a Business Day; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;the location and number of the Borrower&#146;s account to which funds are to be
disbursed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.05 <U>Funding of Loans</U>. Subject to Article&nbsp;V and the other provisions hereof,
the Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 2:00 p.m., Houston, Texas time, to the applicable
account of the Borrower referred to in Section&nbsp;2.04(iii).
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III<BR>
Payments of Principal and Interest</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.01 <U>Repayment of Loans and Interest</U>. Accrued and unpaid interest on each
outstanding Loan shall be due and payable quarterly commencing on the first day of January&nbsp;2006,
and continuing on the first day of each April, July, October and January thereafter while any Loan
remains outstanding, the payment in each instance to be the amount of interest which has accrued
and remains unpaid in respect of the Loans. The Borrower will pay to the Lender the outstanding
principal balance on the Loans as well as all other Indebtedness on the Final Maturity Date. The
Borrower shall, however, have the right at any time and from time to time to prepay any Loan in
whole or in part, subject to prior notice in accordance with Section&nbsp;3.03.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.02 <U>Interest</U>. Subject to the terms of this Agreement (including, without
limitation, Section&nbsp;10.14) interest on the Loans shall accrue and be payable at a rate per annum
equal to the Effective Rate. Interest shall be computed on the basis of a year of 365 or 366&nbsp;days,
as applicable, for the actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Interest provided for herein shall be calculated on unpaid
sums actually advanced and outstanding pursuant to the terms of this Agreement and only for the
period from the date or dates of such advances until repayment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.03 <U>Prepayments</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Borrower may prepay any Loan in whole or in part upon not less than ten Business
Day&#146;s prior notice to the Lender, which notice shall specify the prepayment date (which shall be a
Business Day) and the amount of the prepayment (which shall be in multiples of $100,000 or the
remaining principal balance outstanding on the Note) and shall be irrevocable and effective upon
receipt by the Lender, provided that interest on the principal prepaid, accrued to the prepayment
date, shall be paid on the prepayment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Subject to the exercise by Lender of the conversion option provided in Section&nbsp;3.04,
following the closing of any sale of Capital Stock of the Borrower whereupon the Borrower receives
gross proceeds in excess of $50,000,000, the Borrower shall promptly prepay all loans outstanding
hereunder and all other Indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Upon prepayment of all Loans pursuant to Section&nbsp;3.03(a) and/or (b)&nbsp;and subject to
payment of all other Indebtedness, the Borrower may terminate this Agreement upon written notice
from a Responsible Officer to the Lender, which notice shall be irrevocable and effective upon
receipt by the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Prepayments permitted under this Section&nbsp;3.03 shall be without premium or penalty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.04 <U>Conversion</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Lender may elect to convert all or any part of the outstanding Loans and any accrued
interest thereon into Capital Stock in accordance with the Note provided pursuant to Section&nbsp;2.02.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event the Lender elects to convert less than all of the outstanding Loans and
accrued interest thereon into Capital Stock in accordance with Section&nbsp;3.04(a) or is otherwise
restricted from doing so, the un-converted portion of the Loans and accrued interest thereon
shall, subject to the other terms of this Agreement and the Note, remain outstanding and, at the
option of the Lender, the Commitment Amount shall immediately be reduced to match the total amount
of all outstanding Loans.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV<BR>
Payments; Computations; Etc.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.01 <U>Payments</U>. Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by the Borrower under this Agreement and the
other Loan Documents shall be made in Dollars to the Lender at such account in Houston, Texas or
elsewhere as the Lender shall specify by notice to the Borrower from time to time, not later than
11:00 a.m. Houston, Texas time on the date on which such payments shall become due (each such
payment made after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the fullest extent permitted by
applicable law) defense, set-off or counterclaim. Each payment to be made to the Lender under this
Agreement or the other Loan Documents shall be paid promptly to the Lender, in immediately
available funds. If the due date of any payment under this Agreement or the other Loan Documents
would otherwise fall on a day that is not a Business Day, such date shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so extended for the period
of such extension.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.02 <U>Taxes</U>. To the fullest extent permitted by applicable law, the Borrower
agrees to pay any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any other Loan
Documents (other than any taxes measured by or imposed on the net income or profit or gross
receipts of the Lender).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V<BR>
Conditions Precedent</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.01 <U>Execution of Documentation</U>. Concurrently with the execution hereof, the
following documents shall have been received by the Lender and satisfaction of the other
conditions provided in this Section&nbsp;5.01 shall have occurred, each of which shall be satisfactory
to the Lender in form and substance:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;A certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i)
resolutions of its board of directors or respective governing body with respect to its
authorization to execute and deliver the Credit Agreement and the other Loan Documents, (ii)&nbsp;its
officers (y)&nbsp;who are authorized to sign the Loan Documents and (z)&nbsp;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 the
Loan Documents and the transactions contemplated hereby and (iii)&nbsp;Organizational Documents
certified as being true and complete.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Certificates of the state agencies of the jurisdiction of organization and of each other
jurisdiction where activities require qualification with respect to the existence, qualification
and good standing, where applicable, of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Note, duly completed and executed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Security Agreement, duly completed and executed in form satisfactory to the each of
the parties thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Payment of all amounts then due and payable pursuant to Section&nbsp;10.03.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Such other documents as the Lender or special counsel to the Lender may reasonably
request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.02 <U>Additional Conditions</U>. The obligation of the Lender to make each Loan
hereunder, including the initial Loan, is subject to the further conditions precedent that, as of
the date of such Loan and after giving effect thereto:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Lender shall have received a Borrowing Request;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No Default shall have occurred and be continuing;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;No Material Adverse Effect shall have occurred; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The representations and warranties made by the Borrower in the Loan Documents shall be
true on and as of the date of the making of such Loan with the same force and effect as if made on
and as of such date and following such Loan, except to the extent such representations and
warranties are expressly limited to an earlier date or to the extent the Lender may expressly
consent in writing to the contrary.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI<BR>
Representations and Warranties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower represents and warrants to the Lender that (each representation and warranty
herein is given as of the Closing Date and shall be deemed repeated and reaffirmed on each date of
a Loan):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.01 <U>Existence</U>. The Borrower: (i)&nbsp;is duly organized or formed, legally
existing and in good standing, where applicable, under the laws of the jurisdiction of its
incorporation, organization or formation; (ii)&nbsp;has all requisite organizational power, and has all
governmental licenses, authorizations, consents and approvals necessary to own its assets and carry
on its business as now being or as proposed to be conducted and the lack of which would have a
Material Adverse Effect; and (iii)&nbsp;is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary where failure so to
qualify would have a Material Adverse Effect. A true and complete copy of the certificates of
formation, operating agreements and/or articles of incorporation and bylaws (as the case may be) of
the Borrower, and all other documents creating and governing such entities (collectively the
&#147;<U>Organizational Documents</U>&#148;), have been furnished to the Lender. The
Organizational
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Documents of the Borrower were duly executed and delivered, are in full force and effect, and
binding upon and enforceable in accordance with their respective terms. The Borrower&#146;s
Organizational Documents constitute the entire understanding among its members. No breach exists
under any of the Organizational Documents and no act has occurred and no condition exists which,
with the giving of notice or the passage of time would constitute a breach under the
Organizational Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.02 <U>Financial Condition</U>. The Borrower does not have on the Closing Date any
material Debt, contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.03 <U>Litigation</U>. At the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any nature pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower, that involves the
possibility of any judgment or liability against the Borrower that could reasonably be expected to
have a Material Adverse Effect or that challenges the validity of any Loan Document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.04 <U>No Breach</U>. Neither the execution and delivery of the Loan Documents, nor
compliance with the terms and provisions hereof will conflict with or result in a breach of the
Organizational Documents of the Borrower, or any Governmental Requirement or any agreement or
instrument to which the Borrower is a party or by which it is bound or to which it or its
Properties are subject, or constitute a default under any such agreement or instrument, or result
in the creation or imposition of any Lien upon any of the revenues or assets of the Borrower
pursuant to the terms of any such agreement or instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.05 <U>Authority</U>. The Borrower has all necessary limited liability company,
power and authority to execute, deliver and perform its obligations under the Loan Documents; and
the execution, delivery and performance by the Borrower of the Loan Documents has been duly
authorized by all necessary action on its part; and the Loan Documents constitute the legal, valid
and binding obligations of the Borrower, enforceable in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors&#146; rights generally and the application of general principles of equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.06
<U>Approvals</U>. No authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority or of any other Person are necessary for the
execution, delivery or performance by the Borrower of the Loan Documents or for the validity or
enforceability thereof that have not been provided to the Lender prior to the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.07 <U>Use of Loan Proceeds</U>. The proceeds of the Loans shall be used only for
the leasing of offshore state lease blocks or federal outer continental shelf lease blocks,
expenses associated with exploration drilling in such blocks and general corporate purposes. The
Borrower is not engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation&nbsp;G, U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of the Loans hereunder will be used to buy or carry any
margin stock.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.08 <U>No Material Misstatements</U>. No written information, statement, exhibit,
certificate, document or report furnished to the Lender by the Borrower in connection with the
negotiation of this Agreement or any other Loan Document contains any material misstatement of
fact or omits 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. There is no
fact specific to the Borrower that 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 that has not
been set forth in this Agreement or the other documents, certificates and statements furnished to
the Lender by or on behalf of the Borrower, prior to, or on, the Closing Date in connection with
the transactions contemplated hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.09 <U>Subsidiaries</U>. The Borrower currently has no Subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.10 <U>Defaults</U>. The Borrower is not in default and no event or circumstance
has occurred which, but for the expiration of any applicable grace period or the giving of notice,
or both, would constitute a default under any material agreement or instrument to which the
Borrower is a party or by which the Borrower is bound. No Default hereunder has occurred and is
continuing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.11 <U>Compliance with the Law</U>. The Borrower has not violated any Governmental
Requirement or failed to obtain any license, permit, franchise or other governmental authorization
necessary for the ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were asserted by any Person
through appropriate action) a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.12 <U>Security Agreement</U>. The provisions of the Security Agreement are
effective to grant to the Lender legal, valid and enforceable mortgage liens and security
interests on all of the risks, title and interest of the Borrower in the property described
therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.13 <U>Titles, etc</U>. The Borrower has good title to its respective material
(individually or in the aggregate) Properties, free and clear of all Liens except for Liens
otherwise permitted or contemplated by this Agreement or the other Loan Documents.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII<BR>
Affirmative Covenants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower covenants and agrees that, so long as the Commitment is in effect and until
payment in full of all Indebtedness hereunder, all interest thereon and all other amounts payable
by the Borrower hereunder:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.01 <U>Financial Statements</U>. The Borrower shall deliver, or shall cause to be
delivered, to the Lender:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;As soon as available and in any event within 60 Days after the end of each fiscal year of
the Borrower, the statements of income and members&#146; or owner&#146;s equity of the Borrower for such
fiscal year, and the related balance sheet of the Borrower as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding figures for the preceding fiscal
year, and accompanied by the certificate of a Responsible Officer, which
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">certificate shall state that said financial statements fairly present the financial condition and
results of operations of the Borrower as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Promptly after the Borrower knows that any Default or any Material Adverse Effect has
occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Promptly upon receipt thereof, a copy of each report or letter submitted to the Borrower
by independent accountants in connection with any annual, interim or special audit made by them of
the books of the Borrower and a copy of any response by the Borrower or the governing body of the
Borrower to such letter or report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;From time to time such other information regarding the business, affairs or financial
condition of the Borrower as the Lender may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.02 <U>Litigation</U>. The Borrower shall promptly give to the Lender notice of:
(i)&nbsp;all material legal or arbitral proceedings, all material proceedings before any Governmental
Authority and all legal proceedings in which injunctive or similar relief is sought, against or
affecting the Borrower, or any of its Properties, that individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect and (ii)&nbsp;of any litigation or proceeding
involving any Loan Document. The Borrower will promptly notify the Lender of any claim, judgment,
Lien or other encumbrance affecting any Property of the Borrower, if such claim, judgment, Lien,
or other encumbrance could reasonably be expected to have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.03
<U>Maintenance, Etc</U>. The Borrower shall: preserve and maintain its legal
existence (except as permitted by Section&nbsp;8.03) and all of its material rights, privileges and
franchises; keep books of record and account in which full, true and correct entries will be made
of all dealings or transactions in relation to its business and activities; comply with all
Governmental Requirements if failure to comply with such requirements would have a Material
Adverse Effect; upon reasonable notice, permit representatives of the Lender, during normal
business hours, to examine, copy and make extracts from its books and records, to inspect its
Properties, and to discuss its business and affairs with its officers, all to the extent
reasonably requested by the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.04 <U>Further Assurances</U>. The Borrower will cure promptly any defects in the
creation and issuance of the Note and the execution and delivery of the Loan Documents. The
Borrower at its expense will promptly execute and deliver to the Lender upon request all such
other documents, agreements and instruments to comply with or accomplish the covenants and
agreements of the Borrower in the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.05 <U>Performance of Obligations</U>. The Borrower will pay the Note according to
its terms; and the Borrower will do and perform every act and discharge all of the obligations
provided to be performed and discharged by them under this Agreement or the other Loan Documents,
at the time or times and in the manner specified.
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.06 <U>Insurance</U>. From and after the date hereof, the Borrower shall
maintain and shall continue to maintain with financially sound and reputable insurers, insurance
with respect to their respective Properties and business against such liabilities, casualties,
risks and contingencies and in such types and amounts as provided in the Security Agreement and as
is customary in the case of Persons engaged in the same or similar businesses and similarly
situated. Upon request of the Lender, the Borrower will furnish or cause to be furnished to the
Lender from time to time a summary of the insurance coverage of the Borrower in form and substance
satisfactory to the Lender and if requested will furnish the Lender copies of the applicable
policies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.07 <U>Taxes and Other Liens</U>. The Borrower will pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed upon the Borrower or upon the income
or any Property of the Borrower as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a Lien upon any or all of the
Property of the Borrower; provided, the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted by or on behalf of the
Borrower, and if the Borrower shall have set up reserves therefore adequate under GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.08 <U>Environmental Laws</U>. The Borrower shall, except as, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i)&nbsp;comply with
all Environmental Laws, and obtain, comply with and maintain any and all environmental permits
necessary for its operations as conducted and as planned, (ii)&nbsp;take all reasonable efforts to
ensure that all of its tenants, subtenants, contractors, subcontractors, and invitees comply with
all Environmental Laws, and obtain, comply with and maintain any and all applicable environmental
permits and (iii)&nbsp;comply with all orders and directives of all Governmental Authorities regarding
Environmental Laws, other than such orders and directives as to which an appeal or other
appropriate action to contest such order or directive has been timely and properly taken in good
faith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.09 <U>Maintenance of Liens</U>. The Borrower will cause to be performed any and
all acts to ensure that the Lender have first priority perfected liens on, and security interests
in, the Properties described in the Security Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.10 <U>Adequate Capitalization</U>. If the Borrower engages in an offering of
Capital Stock, the Borrower will ensure that there are sufficient authorized shares, after giving
effect to all outstanding options, warrants, convertible securities, calls, rights, commitments,
preemptive rights or agreements or instruments or understandings of any character, to permit the
Lender to exercise fully its conversion option under this Agreement and the Note.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII<BR>
Negative Covenants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower covenants and agrees that, so long as the Commitment is in effect and until
payment in full of the Loans hereunder and all other Indebtedness, all interest thereon and all
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">other amounts payable by the Borrower hereunder, without the prior written consent of the Lender:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.01 <U>No Amendments of Organizational Documents</U>. The Borrower shall not amend
or modify its Organizational Documents without the prior written consent of the Lender, unless
such amendments or modifications are ministerial in nature.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.02 <U>Use of Proceeds</U>. The proceeds of the Loans shall not be used for
anything other than the uses specified in Section&nbsp;6.07.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.03 <U>Sale of Assets, Consolidation, Merger, Dissolution, Etc</U>. The Borrower
shall not directly or indirectly, (a)&nbsp;merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or (b)&nbsp;wind up, liquidate or
dissolve, or (c)&nbsp;sell, lease, transfer or assign any of its material Properties, or (d)&nbsp;agree to
do any of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.04 <U>Indebtedness</U>. The Borrower will not incur, create, assume or suffer to
exist any Debt other than (a)&nbsp;the Indebtedness, (b)&nbsp;letters of credit, surety or other bonds and
similar instruments provided by the Borrower in connection with its leasing of or exploration
drilling in state offshore lease blocks and federal outer continental shelf lease blocks, (c)
accounts payable (for the deferred purchase price of Property or services) from time to time
incurred in the ordinary course of business which, if greater than ninety (90)&nbsp;days past the
invoice or billing date, are being contested in good faith by appropriate proceedings and the
Borrower shall have established reserves adequate under GAAP therefore and (d)&nbsp;other Debt not
exceeding, at any time, $100,000 in the aggregate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.05 <U>Liens</U>. The Borrower will not create, incur, assume or permit to exist
any Lien on any of its Properties (now owned or hereafter acquired) other than (a)&nbsp;Liens securing
the payment of any Indebtedness, (b)&nbsp;Excepted Liens and (c)&nbsp;Liens to secure Debt permitted under
Section&nbsp;8.04.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.06 <U>Negative Pledge Clauses</U>. The Borrower will not enter into with any
Person any agreement, other than this Agreement, which prohibits or limits the ability of the
Borrower to create, incur, assume or suffer to exist any Lien upon any of its Properties, assets
or revenues, whether now owned or hereafter acquired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.07
<U>Investments, Loans and Advances</U>. The Borrower will not make or permit to
remain outstanding any loans or advances to or investments in any Person, except that the foregoing
restriction shall not apply to: (a)&nbsp;investments in direct obligations of the United States of
America or any agency thereof, (b)&nbsp;investments in certificates of deposit of maturities less than
one year, issued by commercial lenders in the United States having capital and surplus in excess of
$50,000,000, and (c)&nbsp;investments in commercial paper of maturities less than one year if at the
time of purchase such paper is rated in either of the two highest rating categories of Standard &#038;
Poors Corporation, Moody&#146;s Investors Service, Inc., or any other rating agency satisfactory to
Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.08
<U>Dividends, Distributions and Redemptions</U>. The Borrower will not declare
or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock now or
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hereafter outstanding, return any capital to its stockholders, or make any distribution of its
assets to its stockholders as such.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.09 <U>Nature of Business</U>. The Borrower will not materially change the
character of its business as carried on at the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.10 <U>Transactions with Affiliates</U>. The Borrower will not enter into any
transaction, including, without limitation, any purchase, sale, lease or exchange of Property or
the rendering of any service, with any Affiliate unless such transactions are otherwise permitted
under this Agreement and are upon fair and reasonable terms no less favorable to it than it would
obtain in a comparable arm&#146;s length transaction with a Person not an Affiliate.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX<BR>
Events of Default; Remedies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9.01 <U>Events of Default</U>. One or more of the following events shall
constitute an &#147;<U>Event of Default&#148;</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Borrower shall default in the payment or prepayment when due of any principal of or
interest on any Loan or any fees or other amount payable by it hereunder or under any Loan Document
and such default, other than a default of a payment or prepayment of principal, shall continue
unremedied for a period of two Business Days; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Borrower shall default in the payment when due of any principal of or interest on any
of its other Debt aggregating $100,000 or more, or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Debt shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit
the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to
cause, such Debt to become due prior to its stated maturity; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any representation, warranty or certification made or deemed made herein or in any other
Loan Document by the Borrower or any certificate furnished to the Lender pursuant to the
provisions hereof or any other Loan Document, shall prove to have been false or misleading as of
the time made or furnished in any material respect; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;the Borrower shall default in the performance of any of its obligations under Article
VIII or any other Article of this Agreement other than under Article&nbsp;VII; or the Borrower shall
default in the performance of any of its obligations under Article&nbsp;VII or under any other Loan
Document (other than the payment of amounts due which shall be governed by Section&nbsp;9.01(a)) and
such default shall continue unremedied for a period of 30&nbsp;days after the earlier to occur of (i)
notice thereof to the Borrower by the Lender or (ii)&nbsp;the Borrower otherwise becoming aware of such
default; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;the Borrower shall admit in writing its inability to, or be generally unable
to, pay its debts as such debts become due; or
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;the Borrower shall (i)&nbsp;apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property, (ii)&nbsp;make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (iv)
file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment of debts, (v)&nbsp;fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or (vi)&nbsp;take any action for
the purpose of effecting any of the foregoing; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;a proceeding or case shall be commenced, without the application or consent of the
Borrower in any court of competent jurisdiction, seeking (i)&nbsp;its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts, (ii)&nbsp;the appointment
of a trustee, receiver, custodian, liquidator or the like of the Borrower of all or any
substantial part of its assets, or (iii)&nbsp;similar relief in respect of the Borrower under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60&nbsp;days; or (iv)&nbsp;an order for relief against the Borrower shall be entered in an
involuntary case under the Federal Bankruptcy Code; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;a judgment or judgments for the payment of money in excess of $100,000 in the aggregate
shall be rendered by a court against the Borrower and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof shall not be
procured, within 30&nbsp;days from the date of entry thereof and the Borrower shall not, within said
period of 30&nbsp;days, or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such appeal;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;a Change of Control to which the Lender has not consented in writing shall occur; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;the occurrence of any event having a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9.02 <U>Remedies</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;In the case of an Event of Default other than one referred to in clauses (e), (f)&nbsp;or (g)
of Section&nbsp;9.01, the Lender may, by notice to the Borrower, cancel the Commitment and/or declare
the principal amount then outstanding of, and the accrued interest on, the Loans and all other
amounts payable by the Borrower hereunder and under the Note to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of
which are hereby expressly waived by the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;In the case of the occurrence of an Event of Default referred to in clauses (e), (f)&nbsp;or
(g)&nbsp;of Section&nbsp;9.01, the Commitment shall be automatically canceled and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts payable
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by the Borrower hereunder and under the Note shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;All proceeds received after maturity of the Note, whether by acceleration or otherwise
shall be applied first to reimbursement of expenses and indemnities provided for in the Loan
Documents; second to accrued interest on the Note; third to fees; fourth to principal outstanding
on the Note and other Indebtedness; and, to the extent of any excess, to the Borrower or as
otherwise required by any Governmental Requirement.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE X<BR>
Miscellaneous</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.01 <U>Waiver</U>. No failure on the part of the Lender to exercise and no delay
in exercising, and no course of dealing with respect to, any 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 remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.02 <U>Notices</U>. Except as otherwise provided herein, all notices and other
communications hereunder shall be given or made by telecopy, courier or U.S. Mail or in writing
and telecopied, mailed or delivered to the intended recipient at the &#147;Address for Notices&#148;
specified below its name on the signature pages hereof or, as to any party, at such other address
as shall be designated by such party in a notice to each other party. Except as otherwise provided
in this Agreement, all such communications shall be deemed to have been duly given when received
by the party to whom it is addressed, except that if sent by telecopy after 1:00 p.m. local time,
such communication shall be deemed duly given on the next succeeding Business Day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.03
<U>Payment of Expenses, Indemnities, Etc</U>. The Borrower agrees:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;whether or not the transactions hereby contemplated are consummated, to pay upon request
all reasonable expenses of the Lender in the administration (both before and after the execution
hereof and including advice of counsel as to the rights and duties of the Lender with respect
thereto) of, and in connection with, the negotiation, investigation, preparation, execution and
delivery of, preservation of rights under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or consent relating thereto
(including, without limitation, travel, photocopy, mailing, courier, telephone and other similar
expenses of the Lender, the reasonable fees and disbursements of counsel and other outside
consultants for the Lender and, in the case of enforcement, the reasonable fees and disbursements
of counsel for the Lender); and promptly reimburse the Lender upon request for all amounts
expended, advanced or incurred by the Lender to satisfy any obligation of the Borrower under this
Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)<B>&nbsp;TO
RELEASE, INDEMNIFY AND DEFEND THE LENDER AND ITS AFFILIATES, AND EACH OF
THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,</B>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ATTORNEYS,
ACCOUNTANTS AND EXPERTS (&#147;<U><B>INDEMNIFIED PARTIES</B></U>&#148;) FROM AND AGAINST ALL CLAIMS,
ACTION SUITS AND OTHER LEGAL ACTIONS COMMENCED OR ASSERTED AGAINST ANY ONE OR MORE OF THE
INDEMNIFIED PARTIES (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF,
ARISING OUT OF OR IN ANY WAY RELATED TO (I)&nbsp;ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE
PROCEEDS OF THE LOANS, (II)&nbsp;THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III)
THE OPERATIONS OF THE BUSINESS OF THE BORROWER, (IV)&nbsp;THE FAILURE OF THE BORROWER TO COMPLY WITH
THE TERMS OF ANY LOAN DOCUMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V)&nbsp;ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER SET FORTH IN ANY OF THE LOAN
DOCUMENTS, (VI)&nbsp;ANY ASSERTION THAT THE LENDER WAS NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE LOAN DOCUMENTS OR (VII)&nbsp;ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM;
AND</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;TO RELEASE, INDEMNIFY AND HOLD HARMLESS EACH INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I)&nbsp;UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE
BORROWER OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT
OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF ITS PROPERTIES, (II)&nbsp;AS A RESULT OF THE
BREACH OR NON-COMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER, (III)&nbsp;DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY OF
ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH LAWFUL AND
FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV)&nbsp;THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT
ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER, OR (V)&nbsp;ANY OTHER
ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;No Indemnified Party may settle any claim to be indemnified without the consent of the
indemnitor, such consent not to be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified Party proposes, if the
indemnitor does not have the financial ability to pay all its obligations outstanding and
asserted against the indemnitor at that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section&nbsp;10.03.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;In the case of any indemnification hereunder, the Lender shall give notice to the
Borrower of any such claim or demand being made against the Indemnified Party and the Borrower
shall have the non-exclusive right to join in the defense against any such claim or demand
provided that if the Borrower assumes and prosecutes the defense of such claim or demand, the
Indemnified Party shall bear its own cost of defense unless there is a conflict between the
Borrower and such Indemnified Party.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <B>THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES 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 IDENTD7IED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY
IMPOSED WITHOUT FAULT ON ANY ONE OR MORE
OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO
HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION
OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;The Borrower&#146;s obligations under this Section&nbsp;10.03 shall survive any
termination of this Agreement and the payment of the Note and shall continue thereafter in
full force and effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;The Borrower shall pay any amounts due under this Section&nbsp;10.03 within 10&nbsp;days of the
receipt by the Borrower of notice of the amount due.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.04
<U>Amendments, Etc.</U> Any provision of any Loan Document may be amended,
modified or waived with the Borrower&#146;s and the Lender&#146;s prior written consent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.05 <U>Successors and Assigns</U>. Subject to compliance with Section&nbsp;10.06 below,
this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.06 <U>Assignments</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Borrower may not assign its rights or obligations hereunder or under the Note without
the prior written consent of the Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Lender may at any time assign all or a portion of its rights and obligations under
this Agreement to one or more Affiliates of the Lender. Upon receipt of such executed assignment,
the Borrower, will, at its own expense, execute and deliver a new Note to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section&nbsp;10.06(b), the assignee will become a
&#147;Lender,&#148; if not already a &#147;Lender,&#148; for all purposes of this Agreement. The assignor shall be
relieved of its obligations hereunder to the extent of such assignment (and if the assigning
Lender no longer holds any rights or obligations under this Agreement, such assigning Lender shall
cease to be a &#147;Lender&#148; hereunder except that its rights under Sections&nbsp;4.02 and 10.03 shall not be
affected).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Except as provided in (b)&nbsp;above, the Lender may, upon the written consent of the Borrower
(which consent shall not be unreasonably withheld and the Borrower shall only have the right to
consent so long as no Default or Event of Default exists hereunder) assign to one or more assignees
all or a portion of its rights and obligations under this Agreement. Any assignment will become
effective upon the execution and delivery of the assignment to the Borrower. Upon receipt and
acceptance of such executed assignment, the Borrower, will, at its
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">own expense, execute and deliver a new Note to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Upon the effectiveness of any
assignment pursuant to this Section&nbsp;10.06(c), the assignee will become a &#147;Lender,&#148; if not already
a &#147;Lender,&#148; for all purposes of this Agreement. The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender no longer holds any rights
or obligations under this Agreement, such assigning Lender shall cease to be a &#147;Lender&#148; hereunder
except that its rights under Sections&nbsp;4.02 and 10.03 shall not be affected).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Lender may furnish any information concerning the Borrower in its possession from
time to time to assignees (including prospective assignees).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Notwithstanding any other provisions of this Section&nbsp;10.06, no transfer or assignment of
the interests or obligations of the Lender or any grant of participations therein shall be
permitted if such transfer, assignment or grant would (i)&nbsp;require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the &#147;Blue Sky&#148; laws of any state
or (ii)&nbsp;subject the Borrower to any withholding tax or other charge pursuant to Section&nbsp;4.02.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;If any assignment by the Lender pursuant to this Section&nbsp;10.06 shall be of less than all
of the Lender&#146;s rights and obligations under this Agreement, then the Borrower shall continue to
deal solely and directly with the Lender as if such assignment had not taken place.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.07 <U>Invalidity</U>. In the event that any one or more of the provisions
contained in any of the Loan Documents shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision of any of the other Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.08 <U>Counterparts</U>. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Agreement by signing any such counterpart.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.09 <U>References</U>. The words &#147;herein,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and other words
of similar import when used in this Agreement refer to this Agreement as a whole, and not to any
particular article, section or subsection. Any reference herein to a Section shall be deemed to
refer to the applicable Section of this Agreement unless otherwise stated herein. Any reference
herein to an exhibit or schedule shall be deemed to refer to the applicable exhibit or schedule
attached hereto unless otherwise stated herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.10 <U>Survival</U>. The obligations of the parties under Section&nbsp;4.02 and
Section&nbsp;10.03 shall survive the repayment of the Loans and the termination of the Commitment. To
the extent that any payments on the Indebtedness 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 Lender&#146;s rights, powers and remedies under 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 Lender to effect such reinstatement.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.11 <U>Captions</U>. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.12 <U>No Oral Agreements</U>. <B>THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THE LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES 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.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.13 <U>Governing Law</U>. <B>THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS (EXCLUDING ANY
CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES THAT MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF
ANY OTHER JURISDICTION).</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.14 <U>Interest</U>. It is the intention of the parties hereto that Lender shall
conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated
hereby would be usurious as to the Lender under laws applicable to it (including the laws of the
United States of America or any other jurisdiction whose laws may be mandatorily applicable to the
Lender notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in the Loan Documents or any agreement entered into in
connection with or as security for the Note, it is agreed as follows: (i)&nbsp;the aggregate of all
consideration that constitutes interest under law applicable to the Lender that is contracted for,
taken, reserved, charged or received by the Lender under any of the Loan Documents or agreements or
otherwise in connection with the Note 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 the 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 the Lender to the Borrower); and (ii)&nbsp;in the event that the maturity of the Note 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 the 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 the Lender as of the date of
such acceleration or prepayment and, if theretofore paid, shall be credited by the 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 the Lender to the
Borrower). All sums paid or agreed to be paid to the Lender for the use, forbearance or detention
of sums due hereunder shall, to the extent permitted by law applicable to the Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans evidenced by the Note until
payment in full so that the rate or amount of interest on account of the Loans hereunder does not
exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i)
the amount of interest payable to the Lender on any date shall be computed at the Highest Lawful
Rate applicable to the Lender pursuant to this Section&nbsp;10.14 and (ii)&nbsp;in respect of any subsequent
interest computation period
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the amount of interest otherwise payable to the Lender would be less than the amount of
interest payable to the Lender computed at the Highest Lawful Rate applicable to the Lender, then
the amount of interest payable to the Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to the Lender until the
total amount of interest payable to the Lender shall equal the total amount of interest which would
have been payable to the Lender if the total amount of interest had been computed without giving
effect to this Section&nbsp;10.14.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;SIGNATURE PAGE NEXT PAGE&#093;
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties hereto have caused this Agreement to be duly executed as of the day and year first
above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">BORROWER:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">PRIME OFFSHORE L.L.C</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:<BR>
Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jim R. Brock
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jim R. Brock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address for Notices:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;9821 Katy Freeway, Suite&nbsp;1050</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;Houston, Texas 77024</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facsimile No.: (713)&nbsp;461-9231</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Telephone No.: (713)&nbsp;461-7221</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: Jim R. Brock</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">LENDER:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">PRIMEENERGY CORPORATION</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:<BR>
Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Beverly A. Cummings
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address for Notices:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;1 Landmark Square, 11<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor&nbsp;<BR>
Stamford,
Connecticut 06901</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facsimile No.: (203)&nbsp;358-5786<BR>

Telephone No.: (203)&nbsp;358-5701<BR>

Attention: Charles E. Drimal, Jr.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SIGNATURE PAGE<BR>
CREDIT AGREEMENT
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U><B>FORM OF CONVERTIBLE NOTE</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$40,000,000
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">August&nbsp;22, 2005</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, Prime Offshore L.L.C., a Delaware limited liability company (the
&#147;<U>Borrower&#148;</U>), hereby promises to pay to the order of PrimeEnergy Corporation, a Delaware
corporation (the &#147;<U>Lender</U>&#148;), at such account in Houston, Texas or elsewhere as the Lender shall
specify by notice to the Borrower from time to time, the principal sum of Forty Million Dollars
($40,000,000) (or so much as is advanced pursuant to the terms of Credit Agreement described
below) 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, at such
office, in like money and funds, at the rates per annum and on the dates provided in the Credit
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The date and amount of each Loan and each payment made on account of the principal and
interest hereof shall be recorded by the Lender on its books.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is the Note referred to in the Credit Agreement effective as of even date herewith
between the Borrower and the Lender and evidences Loans made by the Lender thereunder (such Credit
Agreement as the same may be amended or supplemented from time to time, the &#147;<U>Credit
Agreement&#148;</U>). Capitalized terms used in this Note have the respective meanings assigned to them
in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 the
Note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Conversion of Note</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, while this Note is outstanding, the Borrower consummates a public offering or private
placement of any class of Capital Stock (all such interests of the Borrower, howsoever
denominated being &#147;<U>New Equity</U>&#148;) in excess of $50.0&nbsp;million (such offering or placement of
New Equity being an &#147;E<U>quity Offering&#148;</U>), then all or any portion of this Note (including
accrued and unpaid interest to the date of conversion) may be converted, at the option of the
Lender, into New Equity of the Borrower in accordance with the terms hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Borrower intends to conduct an Equity Offering, the Borrower shall give the Lender
written notice of such intention and a time period during which it reasonably anticipates such
Equity Offering to be consummated. The Borrower will further deliver any prospectus or offering
circular (both a preliminary and final) or other offering material prepared in connection with
such proposed Equity Offering. The Lender shall, within 10&nbsp;days following its receipt of the final
prospectus or offering circular, notify the Borrower of its election to (i)&nbsp;have all or a
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">portion of outstanding principal balance of the Note and accrued and unpaid interest thereon
repaid in full in cash or (ii)&nbsp;convert all or a portion of outstanding principal balance of the
Note and accrued and unpaid interest thereon into shares of New Equity at the same offering price
and terms upon which the New Equity is sold and the amount so converted will be deemed to have
been paid. If more than one class of New Equity is sold or to be sold, the Lender will have the
option to select from among the classes and shall specify the class and amounts in its notice to
the Borrower and if no election is made among classes, but an election is made to convert into
New Equity, such conversion shall be allocated among the classes at the discretion of the
Borrower. If the Lender fails to make any affirmative election, the Lender shall be deemed to
have elected to have the entire outstanding principal balance of the Note, together with all
accrued and unpaid interest, paid in cash on the 10th day following the date on which the Equity
Offering was consummated. All elections, once made, are irrevocable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent of the Borrower&#146;s delivery to the Lender of the fixed number of shares of New
Equity into which this Note is convertible pursuant to the election made above (together with the
cash payment in lieu of any fractional share of New Equity as contemplated below), such delivery
will be deemed to satisfy the Borrower&#146;s obligation to pay the principal amount of this Note
including the accrued and unpaid interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Elections are subject to the following additional terms:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1) The Lender may convert the Note in part so long as such part is an integral multiple of
$100.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2) No conversion shall result in the issuance of fractional shares of New Equity. If the
Lender would otherwise be entitled to a fractional share, then the Borrower shall pay to the
Lender equal to the then current market value of such fractional share unless the Lender has
elected to maintain its Commitment under the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3) To convert this Note, the Lender must (i)&nbsp;deliver written notice of its conversion
election to the Borrower, (ii)&nbsp;surrender the Note to the Borrower, (iii)&nbsp;if required, furnish
appropriate endorsements and transfer documents and (iv)&nbsp;if required, pay all transfer or similar
taxes. All such actions should occur no later than the 10th day following the completion of the
Equity Offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4) In the case of (i)&nbsp;any reclassification of the New Equity, or (ii)&nbsp;a consolidation, merger
or combination involving the Borrower or a sale or conveyance to another person of the property and
assets of the Borrower as an entirety or substantially as an entirety in each case as a result of
which holders of the New Equity shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such New Equity, the Lender
will generally be entitled thereafter to convert this Note into the kind and amount of shares of
stock, other securities or other property or assets which they would have owned or been entitled to
receive upon such reclassification, change, consolidation, merger, combination, sale or conveyance
had this Note been converted into New Equity immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that the Lender would not have
exercised any rights of election as to the stock, other securities or other property or assets
receivable in connection therewith.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF TEXAS (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES THAT MIGHT LEAD TO THE
APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">PRIME OFFSHORE L.L.C.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jim R. Brock</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->A-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT
B</B></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U><B>FORM OF BORROWING REQUEST</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> _, 200 _

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Charles
E. Drimal, Jr.<BR>
PrimeEnergy Corporation

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to the Credit Agreement, dated as of ________ ___, 2005 (as
amended, modified, supplemented, or restated from time to time, &#147;Agreement&#148;), between the
undersigned and Prime Energy Corporation. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Agreement. The undersigned hereby
gives notice pursuant to Section&nbsp;2.04 of the Agreement that it requests a Loan under the
Agreement, and in that connection sets forth below the terms on which such Loan is requested to be
made:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-0px">Date of Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-0px">Amount of Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-0px">Location of the Borrower&#146;s account
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower hereby certifies that the following statements are true and correct on the date
hereof, and will be true and correct on the date of such Loan requested herein after giving effect
to such Loan:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;this Loan will not cause the total amount of all Loans outstanding after giving effect to
the Loan requested hereby to exceed the Commitment Amount;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the representations and warranties of the Borrower set forth in the Loan Documents are
true and correct in all material respects, except for such representations and warranties that are
expressly limited to an earlier date or to the extent that the Lender may expressly consent in
writing to the contrary;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;no Default or Event of Default has occurred and is continuing; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;no Material Adverse Effect has occurred since the Closing Date.
 </DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->B-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Borrower further certifies that the proceeds of the Loan requested hereunder will be used
in accordance with Section&nbsp;6.07 of the Agreement.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Very truly yours,</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">PRIME OFFSHORE, L.L.C.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->B-2<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>13
<FILENAME>d44173exv10w26.htm
<DESCRIPTION>CREDIT AGREEMENT - GUARANTY BANK, FSB
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w26</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT&nbsp;10.26
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CREDIT AGREEMENT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BETWEEN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PRIME
OFFSHORE L.L.C. <BR><br>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, AS AGENT<BR>
AND A LENDER</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>JUNE 29, 2006</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REVOLVING LINE OF CREDIT OF UP TO $200,000,000</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE I DEFINITIONS AND INTERPRETATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporation of Exhibits</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE II TERMS OF FACILITY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Revolving Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.1A.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility A and B Revolving Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.1B.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility C Revolving Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter of Credit Facility</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Use of Loan Proceeds and Letters of Credit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Repayment of Loans and Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outstanding Amounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Time, Place, and Method of Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pro Rata Treatment; Adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Borrowing Base Determinations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mandatory Prepayments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voluntary Prepayments and Conversions of Loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commitment Fee</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility Fee</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter of Credit Fee</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loans to Satisfy Obligations of Borrower</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Interest in Accounts; Right of Offset</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Provisions Relating to Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Yield Protection</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Types of Loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Illegality</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Regulatory Change</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitations on Interest Periods</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letters in Lieu of Transfer Orders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE III CONDITIONS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Receipt of Loan Documents and Other Items</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Each Loan and Letter of Credit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE IV REPRESENTATIONS AND WARRANTIES</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Authorization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limited Liability Company Existence</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Valid and Binding Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Instruments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title to Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Material Misstatements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liabilities, Litigation, and Restrictions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorizations; Consents</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Laws</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ERISA</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental Laws</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Federal Reserve Regulations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment Company Act Compliance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Public Utility Holding Company Act Compliance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proper Filing of Tax Returns; Payment of Taxes Due</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refunds</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Gas Contracts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Casualties or Taking of Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Locations of Borrower</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE V AFFIRMATIVE COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance and Access to Records</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quarterly Financial Statements; Compliance Certificates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ryder Scott Company Reserve Evaluation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Status of Shareholder Loans</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Log Sections, Maps and Test Dates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Annual Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oil and Gas Reserve Reports</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title Opinions; Title Defects and Mortgages</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices of Certain Events</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letters in Lieu of Transfer Orders; Division Orders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Information</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compliance with Laws</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Assessments and Charges</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Limited Liability Company Existence and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Good Standing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Payment of Notes; Performance of Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Initial Fees and Expenses of Counsel to Agent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsequent Fees and Expenses of Agent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Operation of Oil and Gas Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance and Inspection of Properties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of Insurance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Future Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hedging</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Flow Line Permit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE VI NEGATIVE COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indebtedness</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Contingent Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales of Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leasebacks</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loans or Advances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dividends and Distributions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Issuance of Stock; Changes in Limited Liability Structure</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transactions with Affiliates</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lines of Business</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ERISA Compliance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FWOE Partners L.P</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interest Coverage Ratio</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Net Worth</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General and Administrative Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Minimum Liquidity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Put Right Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE VII EVENTS OF DEFAULT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Enumeration of Events of Default</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Remedies</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE VIII THE AGENT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waivers, Amendments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delegation of Duties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exculpatory Provisions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Reliance by Agent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notice of Default</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-Reliance on Agent and Other Lenders</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnification</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Restitution</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agent in Its Individual Capacity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Successor Agent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Applicable Parties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" align="left">ARTICLE IX MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Transfers; Participations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Representations, Warranties, and Covenants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights of Third Parties</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Renewals; Extensions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Rights Cumulative</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- iii -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival Upon Unenforceability</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments; Waivers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Controlling Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">USA Patriot Act Notice</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GOVERNING LAW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">JURISDICTION AND VENUE</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">WAIVER OF RIGHTS TO JURY TRIAL</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENTIRE AGREEMENT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>LIST OF EXHIBITS</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;I
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Note</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;I(A)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Note</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;II
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Borrowing Request</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;III
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Compliance Certificate</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;IV
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Opinion of Counsel</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;V
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Facility Amounts</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;VI
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Assignment Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- iv - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CREDIT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This <B>CREDIT AGREEMENT </B>is made and entered into this 29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of June, 2006,
by and between PRIME OFFSHORE L.L.C. a Delaware limited liability
company (the &#147;<U>Borrower</U>&#148;), with
each lender that is signatory hereto or becomes a signatory hereto as provided in Section&nbsp;9.1
(individually, together with its successors and assigns, a
&#147;<U>Lender</U>&#148; and collectively together with
their respective successors and assigns, the
&#147;<U>Lenders</U>&#148;) and <B>GUARANTY BANK, FSB</B>, a federal savings
bank, as agent for the Lenders (in such capacity together with its successors in such capacity
pursuant to the terms hereof, the &#147;<U>Agent</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>WITNESSETH</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the mutual covenants and agreements herein contained, the Borrower
and the Lender hereby agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE I</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Terms Defined Above.</U> As used in this
Credit Agreement, the terms &#147;<U>Agent</U>,&#148;
&#147;<U>Borrower</U>&#148; and &#147;<U>Lender</U>&#148; shall have the meaning assigned to them hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Additional Defined Terms</U> . As used in this Credit Agreement, each of the
following terms shall have the meaning assigned thereto in this Section, unless the context
otherwise requires:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Additional Costs</U>&#148; shall mean costs which the Lenders determine are
attributable to its obligation to make or its making or maintaining any LIBO Rate
Loan, or any reduction in any amount receivable by the Lenders in respect of any
such obligation or any LIBO Rate Loan, resulting from any Regulatory Change which
(a)&nbsp;changes the basis of taxation of any amounts payable to the Lenders under this
Agreement or the Note in respect of any LIBO Rate Loan (other than taxes imposed on
the overall net income of the Lender), (b)&nbsp;imposes or modifies any reserve, special
deposit, minimum capital, capital rates, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other liabilities
of, the Lenders (including LIBO Rate Loans and Dollar deposits in the London
interbank market in connection with LIBO Rate Loans), or any commitments of the
Lenders hereunder, (c)&nbsp;increases the Assessment Rate, or (d)&nbsp;imposes any other
condition affecting this Agreement or any of such extensions of credit, liabilities,
or commitments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Adjusted LIBO Rate</U>&#148; shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lender to be equal to the sum of the LIBO Rate for such Loan plus
the Applicable Margin, but in no event exceeding the Highest Lawful Rate.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->  <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; shall mean any Person directly or indirectly controlling, or under common control
with, the Borrower and includes any Subsidiary of the Borrower and any &#147;affiliate&#148; of the Borrower
within the meaning of Reg. &#167;240.12b-2 of the Securities Exchange Act of 1934, as amended, with
&#147;control,&#148; as used in this definition, meaning possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or action through ownership of voting
securities, contract, voting trust, or membership in management or in the group appointing or
electing management or otherwise through formal or informal arrangements or business
relationships.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Agreement</U>&#148; shall mean this Credit Agreement, as it may be amended, supplemented, or restated
from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Lending Office</U>&#148; shall mean, for each type of Loan, the lending office of
the Lender (or an affiliate of the Lender) designated for such type of Loan on the signature pages
hereof or such other office of the Lender (or an affiliate of the Lender) as the Lender may from
time to time specify to the Borrower as the office by which Loans of such type are to be made and
maintained.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Margin</U>&#148; shall mean as to each LIBO Rate Loan 2.00% for Facility A and
3.50% for Facility B and 2.75% for Facility C.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Assessment Rate</U>&#148; shall mean, for any Interest Period, the average rate (rounded
upwards if necessary to the nearest 1/100 of 1%) charged by the Federal Deposit Insurance
Corporation (or any successor thereto) to the Lender for deposit insurance for Dollar time
deposits with the Lender at the Principal Office during such Interest Period, as determined by the
Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Assignment Agreement</U>&#148; shall mean an Assignment Agreement, substantially in the form
of Exhibit&nbsp;VI, with appropriate insertions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Available Commitment</U>&#148; (A)&nbsp;for Facility A, shall mean, at any time, an amount equal
to the remainder, if any, of (a)&nbsp;the Borrowing Base in effect at such time minus (b)&nbsp;the Loan
Balance for Facility A at such time, (B)&nbsp;for Facility B, shall mean, at any time, an amount equal
to the remainder, if any, of (a)&nbsp;the Borrowing Base in effect at such time, minus (b)&nbsp;the Loan
Balance for Facility B at such time and (c)&nbsp;for Facility C shall mean, at any time, an amount
equal to the remainder, if any, of (a)&nbsp;the Borrowing Base in effect at such time minus (b)&nbsp;the
Loan Balance for Facility C at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Base Rate</U>&#148; shall mean, at any time, the rate of interest per annum then most recently
established by the Lender as its base rate, which rate may not be the lowest rate of interest
charged by the Lender to its borrowers. Each change in any interest rate provided for herein based
upon the Base Rate resulting from a change in the Base Rate shall take effect without notice to the
Borrower at the time of such change in the Base Rate.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 2 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Benefited Lender</U>&#148; shall have the meaning assigned to such term in Section&nbsp;2.8(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Base</U>&#148; shall mean, at any time, the amount determined by the Lender in accordance
with Section&nbsp;2.9 and then in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Borrowing Request</U>&#148; shall mean each written request, in substantially the form
attached hereto as Exhibit&nbsp;II, by the Borrower to the Agent for a borrowing, conversion, or
prepayment pursuant to Sections&nbsp;2.1 or 2.11, each of which shall:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) be signed by a Responsible Officer of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) when requesting a borrowing, be accompanied by a
Compliance Certificate or acknowledgment that Borrower is in
compliance;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) specify the amount and type of Loan requested, and,
as applicable, the Loan to be converted or prepaid and the date of
the borrowing, conversion, or prepayment (which shall be a
Business Day);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) when requesting a Floating Rate Loan, be delivered
to the Lender no later than 5:00 p.m., Central Standard or Daylight
Savings Time, as the case may be, on the Business Day preceding
the day of the requested borrowing, conversion, or prepayment;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) when requesting a LIBO Rate Loan, be delivered to
the Lender no later than 10:00&nbsp;a.m., Central Standard or Daylight
Savings Time, as the case may be, three Business Days preceding
the requested borrowing, conversion, or prepayment and designate
the Interest Period requested with respect to such Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Business Day</U>&#148; shall mean (a)&nbsp;for all purposes other than as covered by clause (b)&nbsp;of this
definition, a day other than a Saturday, Sunday, legal holiday for commercial banks under the laws
of the State of Texas, or any other day when banking is suspended in the State of Texas, and (b)
with respect to all requests, notices, and determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is a Business Day described in clause (a)
of this definition and which is a day for trading by and between banks for Dollar deposits in the
London interbank market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Casualty Event</U>&#148; shall mean the damage, destruction or condemnation, as the case may be, of
Property of any person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Closing Date</U>&#148; shall mean the effective date of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Code</U>&#148; shall mean the United States Internal Revenue Code of 1986, as amended from time to
time.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 3 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall mean the Mortgaged Properties and any other Property now or at any time
used or intended as security for the payment or performance of all or any portion of the
Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment</U>&#148; shall mean the obligation of the Lenders, subject to applicable provisions of
this Agreement, to make Loans to or for the benefit of the Borrower pursuant to Section&nbsp;2.1 and to
issue Letters of Credit pursuant to Section&nbsp;2.2.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Fee</U>&#148; shall mean each fee payable to the Lenders by the Borrower pursuant
to Section&nbsp;2.12.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Period</U>&#148; shall mean the period from and including the Closing Date to but
not including the Commitment Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commitment Termination Date</U>&#148; shall mean July&nbsp;1, 2009 for Facility A and January&nbsp;1,
2008 for Facility B and Facility C.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commodity Hedge Agreement</U>&#148; shall mean any crude oil, natural gas, or other
hydrocarbon floor, collar, cap, price protection, or swap agreement, in form and substance with a
Person acceptable to the Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commonly Controlled Entity</U>&#148; shall mean any Person which is under common control with
the Borrower within the meaning of Section&nbsp;4001 of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Completion Commitment</U>&#148; shall mean the commitment of PrimeEnergy Corporation
described in the Completion and Liquidity Maintenance Agreement of even date herewith by and
between PrimeEnergy Corporation, Borrower and Agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Compliance Certificate</U>&#148; shall mean each certificate, substantially in the form
attached hereto as Exhibit&nbsp;III, executed by a Responsible Officer of the Borrower and furnished to
the Lender from time to time in accordance with Sections&nbsp;5.2 and 5.6.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Contingent Obligation</U>&#148; shall mean, as to any Person, without duplication, any
obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person (for purposes of
this definition, a &#147;<u>primary
obligation</u>&#148;) in any manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, regardless of whether such obligation is contingent, (a)&nbsp;to purchase
any primary obligation or any Property constituting direct or indirect security therefore, (b)&nbsp;to
advance or supply funds (i)&nbsp;for the purchase or payment of any primary obligation, or (ii)&nbsp;to
maintain working or equity capital of any other Person in respect of any primary obligation, or
otherwise to maintain the net worth or solvency of any other Person, (c)&nbsp;to purchase Property,
securities or services
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">primarily for the purpose of assuring the owner of any primary obligation of the ability of the
Person primarily liable for such primary obligation to make payment thereof, or (d)&nbsp;otherwise to
assure or hold harmless the owner of any such primary obligation against loss in respect thereof,
with the amount of any Contingent Obligation being deemed to be equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default</U>&#148; shall mean any event or occurrence which with the lapse of time or the giving of
notice or both would become an Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Default Rate</U>&#148; shall mean a per annum interest rate equal to the Base Rate plus five percent
(5%), but in no event exceeding the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Dollars</U>&#148;
and &#147;<U>$</U>&#148; shall mean dollars in lawful currency of the United States of America.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>EBITDAX</U>&#148; shall mean, for any period, Net Income for such period plus interest expense,
federal and state income taxes, depreciation, amortization, exploration expenses and other
non-cash expenses, less non-cash gains for such period deducted in the determination of net income
for such period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental Complaint</U>&#148; shall mean any written complaint, order, directive, claim,
citation, notice of environmental report or investigation, or other notice by any Governmental
Authority or any other Person with respect to (a)&nbsp;air emissions, (b)&nbsp;spills, releases, or
discharges to soils, any improvements located thereon, surface water, groundwater, or the sewer,
septic, waste treatment, storage, or disposal systems servicing any Property of the Borrower, (c)
solid or liquid waste disposal, (d)&nbsp;the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e)&nbsp;other environmental, health, or safety matters affecting any
Property of the Borrower or the business conducted thereon.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Environmental Laws</U>&#148; shall mean (a)&nbsp;the following federal laws as they may be cited,
referenced, and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe
Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Superfund Amendments and Reauthorization Act, and the Toxic Substances
Control Act; (b)&nbsp;any and all equivalent environmental statutes of any state in which Property of
the Borrower is situated, as they may be cited, referenced and amended from time to time; (c)&nbsp;any
rules or regulations promulgated under or adopted pursuant to the above federal and state laws;
and (d)&nbsp;any other equivalent federal, state, or local statute or any requirement, rule,
regulation, code, ordinance, or order adopted pursuant thereto, including, without limitation,
those relating to the generation, transportation,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">treatment, storage, recycling, disposal, handling, or release of Hazardous Substances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>ERISA</U>&#148; shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations thereunder and interpretations thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Event of Default</U>&#148; shall mean any of the events specified in Section&nbsp;7.1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Facility Amount</U>&#148; shall mean, for each Lender, the amount set forth opposite the name of such
Lender on <U>Exhibit&nbsp;V</U> under the caption &#147;Facility Amounts,&#148; as modified from time to time to
reflect assignments permitted by <U>Section&nbsp;9.1</U> or otherwise pursuant to the terms hereof and
to give effect to any written request of the Borrower (any such request being irrevocable, absent
written agreement of the Agent and the Required Lenders, which written agreement may be expressly
conditioned on the payment of a fee (other than with respect to a reduction) by the Borrower to
the Agent, for the account of the Lenders) to a reduction in the sum of the then existing Facility
Amounts of the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Facility Fee</U>&#148; shall mean the fee payable to the Agent for the benefit of Lenders by the
Borrower pursuant to Section&nbsp;2.13.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Final Maturity</U>&#148; shall mean July&nbsp;1, 2009, for Facility A and January&nbsp;1, 2008 for Facility B
and Facility C.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Financial Statements</U>&#148; shall mean statements of the financial condition of the
Borrower and FWOE Partners L.P. as at the point in time and for the period indicated and consisting
of at least a balance sheet and related statements of operations, common stock and other
stockholders&#146; equity, and cash flows for the Borrower and, when required by applicable provisions
of this Agreement to be audited, accompanied by the unqualified certification of an independent
certified public accountants acceptable to the Lender, all of which shall be prepared in accordance
with GAAP consistently applied and in comparative form with respect to the corresponding period of
the preceding fiscal period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Fixed Rate Loan</U>&#148; shall mean any LIBO Rate Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Floating Rate</U>&#148; shall mean an interest rate per annum equal to the Base Rate from time to
time in effect plus 0.50% percent for Facility A and Base Rate plus 1.50% percent for Facility B
and Base Rate plus 1.00% for Facility C, but in no event exceeding the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Floating Rate Loan</U>&#148; shall mean any Loan and any portion of the Loan Balance which
the Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent
Borrowing Request for such portion of the Loan
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Balance, bearing interest at the Floating Rate, or which pursuant to the terms hereof is otherwise
required to bear interest at the Floating Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>GAAP</U>&#148; shall mean generally accepted accounting principles established by the Financial
Accounting Standards Board or the American Institute of Certified Public Accountants and in effect
in the United States from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Governmental Authority</U>&#148; shall mean any nation, country, commonwealth, territory,
government, state, county, parish, municipality, or other political subdivision and any entity
exercising executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Hazardous Substances</U>&#148; shall mean flammables, explosives, radioactive materials,
hazardous wastes, asbestos, or any material containing asbestos, polychlorinated biphenyls (PCBs),
toxic substances or related materials, petroleum, petroleum products, associated oil or natural
gas exploration, production, and development wastes, or any substances defined as &#147;hazardous
substances,&#148; &#147;hazardous materials,&#148; &#147;hazardous wastes,&#148; or &#147;toxic substances&#148; under the
Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund
Amendments and Reauthorization Act, as amended, the Hazardous Materials Transportation Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act,
as amended, or any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Highest Lawful Rate</U>&#148; shall mean the maximum non-usurious interest rate, if any (or,
if the context so requires, an amount calculated at such rate), that at any time or from time to
time may be contracted for, taken, reserved, charged, or received under applicable laws of the
State of Texas or the United States of America, whichever authorizes the greater rate, as such laws
are presently in effect or, to the extent allowed by applicable law, as such laws may hereafter be
in effect and which allow a higher maximum non-usurious interest rate than such laws now allow.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indebtedness</U>&#148; shall mean, as to any Person, without duplication, (a)&nbsp;all liabilities
(excluding reserves for deferred income taxes, deferred compensation liabilities, and other
deferred liabilities and credits) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet, (b)&nbsp;all obligations of such
Person evidenced by bonds, debentures, promissory notes, or similar evidences of indebtedness, (c)
all other indebtedness of such Person for borrowed money, and (d)&nbsp;all obligations of others, to
the extent any such obligation is secured by a Lien on the assets of such Person (whether or not
such Person has assumed or become liable for the obligation secured by such Lien). (Provided,
however, Indebtedness shall not include unsecured advances by members and/or shareholders).
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Insolvency Proceeding</U>&#148; shall mean application (whether voluntary or instituted by
another Person) for or the consent to the appointment of a receiver, trustee, conservator,
custodian, or liquidator of any Person or of all or a substantial part of the Property of such
Person, or the filing of a petition (whether voluntary or instituted by another Person) commencing
a case under Title 11 of the United States Code, seeking liquidation, reorganization, or
rearrangement or taking advantage of any bankruptcy, insolvency, debtor&#146;s relief, or other similar
law of the United States, the State of Texas, or any other jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Intellectual Property</U>&#148; shall mean patents, patent applications, trademarks,
tradenames, copyrights, technology, know-how, and processes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Expense</U>&#148; shall mean, for any period, the total interest expense (including, without
limitation, interest expense attributable to capitalized leases) of the Borrower for such period,
determined in accordance with GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Interest Period</U>&#148; shall mean, subject to the limitations set forth in Section&nbsp;2.22, with
respect to any LIBO Rate Loan, a period commencing on the date such Loan is made or converted from
a Loan of another type pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically corresponding day in the calendar
month that is one, two, or three months thereafter, as the Borrower may request in the Borrowing
Request for such Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Investment</U>&#148; in any Person shall mean any stock, bond, note, or other evidence of
Indebtedness, or any other security (other than current trade and customer accounts) of,
investment or partnership interest in or loan to, such Person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>L/C Exposure</U>&#148; shall mean, at any time, the aggregate maximum amount available to be drawn
under outstanding Letters of Credit at such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit</U>&#148; shall mean any standby letter of credit issued by the Lender for the
account of the Borrower pursuant to Section&nbsp;2.2.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit Application</U>&#148; shall mean the standard letter of credit application
employed by the Lender from time to time in connection with letters of credit, provided that in
the event of a conflict between the terms of each Letter of Credit Application and this Agreement,
this Agreement shall control.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Letter of Credit Fee</U>&#148; shall mean each fee payable to the Lender by the Borrower
pursuant to Section&nbsp;2.14 upon or in connection with the issuance of a Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LIBO Rate</U>&#148; shall mean, with respect to any Interest Period for any LIBO Rate Loan, the
lesser of (a)&nbsp;the rate per annum equal to the average of the offered quotations appearing on
Bloomberg Professional LIBOR Index Page (or if such
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Bloomberg Professional LIBOR Index Page shall not be available, any successor or similar service
selected by the Lender and the Borrower) as of approximately 10:00&nbsp;a.m., Central Standard or
Central Daylight Time, as the case may be, on the day two Business Days prior to the first day of
such Interest Period for Dollar deposits in an amount comparable to the principal amount of such
LIBO Rate Loan and having a term comparable to the Interest Period for such LIBO Rate Loan, or (b)
the Highest Lawful Rate. If neither such Bloomberg Professional LIBOR Index Page nor any successor
or similar service is available, the term &#147;LIBO Rate&#148; shall mean, with respect to any Interest
Period for any LIBO Rate Loan, the lesser of (a)&nbsp;the rate per annum quoted by the Lender at
approximately 11:00&nbsp;a.m., London time (or as soon thereafter as practicable) two Business Days
prior to the first day of the Interest Period for such LIBO Rate Loan for the offering by the
Lender to leading banks in the London interbank market of Dollar deposits in an amount comparable
to the principal amount of such LIBO Rate Loan and having a term comparable to the Interest Period
for such LIBO Rate Loan, or (b)&nbsp;the Highest Lawful Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>LIBO Rate Loan</U>&#148; shall mean any Loan and any portion of the Loan Balance which the
Borrower has requested, in the initial Borrowing Request for such Loan or a subsequent Borrowing
Request for such portion of the Loan Balance, bearing interest at the Adjusted LIBO Rate and which
is permitted by the terms hereof to bear interest at the Adjusted LIBO Rate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Lien</U>&#148; shall mean any interest in Property securing an obligation owed to, or a claim by, a
Person other than the owner of such Property, whether such interest is based on common law,
statute, or contract, and including, but not limited to, the lien or security interest arising from
a mortgage, ship mortgage, encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment, or bailment for security purposes (other than true leases or true
consignments), liens of mechanics, materialmen, and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases,
and other title exceptions and encumbrances affecting Property which secure an obligation owed to,
or a claim by, a Person other than the owner of such Property (for the purpose of this Agreement,
the Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument in any public office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Limitation Period</U>&#148; shall mean, any period while any amount remains owing on the Note
and interest on such amount, calculated at the applicable interest rate, plus any fees or other
sums payable under any Loan Document and deemed to be interest under applicable law, would exceed
the amount of interest which would accrue at the Highest Lawful Rate.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Liquidity Agreement</U>&#148; shall mean the agreement of PrimeEnergy Corporation described
in the Completion and Liquidity Maintenance Agreement that agreement of even date herewith, by and
between PrimeEnergy Corporation, Borrower and the Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan</U>&#148; shall mean any loan made by the Lender to or for the benefit of the Borrower pursuant
to this Agreement and any payment made by the Lender under a Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Balance</U>&#148; shall mean, for Facility A, at any time, the outstanding principal balance of
the amount owed on Facility A at such time, plus the L/C Exposure at such time, excluding L/C
Exposure for L/C&#146;s issued for Commodity Hedge Agreements, (b)&nbsp;for Facility B, at any time, the
outstanding principal balance of the amount owed on Facility B at such time, plus the L/C Exposure
at such time, excluding L/C Exposure for L/C&#146;s issued for Commodity Hedge Agreements, and (c)&nbsp;for
Facility C, at any time, the outstanding principal balance of the amount owed on Facility C at
such time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Documents</U>&#148; shall mean this Agreement, the Note, the Letter of Credit
Applications, the Letters of Credit, the Security Instruments, and all other documents and
instruments now or hereafter delivered pursuant to the terms of or in connection with this
Agreement, the Note, the Letter of Credit Applications, the Letters of Credit, or the Security
Instruments, and all renewals and extensions of, amendments and supplements to, and restatements
of, any or all of the foregoing from time to time in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Material Adverse Effect</U>&#148; shall mean (a)&nbsp;any adverse effect on the business,
operations, properties, or financial condition of the Borrower, which substantially increases the
risk that any of the Obligations will not be repaid as and when due, or (b)&nbsp;any substantially
adverse effect upon the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Mortgaged Properties</U>&#148; shall mean all Oil and Gas Properties and pipelines and
related facilities of the Borrower subject to a perfected first priority Lien in favor of the
Lender for the benefit of the Lenders, subject only to Permitted Liens, as security for the
Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Multiemployer Plan</U>&#148; shall mean a Plan which is a multiemployer plan as defined in
Section&nbsp;4001 (a)(3) of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Net Income</U>&#148; shall mean, for any period, the net income (or loss) of the Borrower for such
period, determined in accordance with GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Notes</U>&#148; shall mean, collectively, each of the promissory notes of the Borrower payable to a
Lender in the amount of the Facility Amount of such Lender in the form attached hereto as
<U>Exhibit&nbsp;I</U> and <U>Exhibit&nbsp;1(A)</U> with all blanks in such form completed appropriately,
together with all renewals, extensions for any period, increases, and rearrangements thereof.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Obligations</U>&#148; shall mean, without duplication, (a)&nbsp;all Indebtedness evidenced by the Note,
(b)&nbsp;the Reimbursement Obligations, (c)&nbsp;the undrawn, unexpired amount of all outstanding Letters of
Credit, (d)&nbsp;the obligation of the Borrower for the payment of Commitment Fees, Facility Fees,
Letter of Credit Fees, and Engineering Fees, (e)&nbsp;all obligations and liabilities whether now
existing or hereafter arising of the Borrower to the Lender in connection with any Commodity Hedge
Agreement or Rate Management Transaction (which if done with a third party, acceptable to the
Agent, will rank pari passu with all other items listed in this definition), including Letters of
Credit issued outside of this facility for Commodity Hedge Agreements or Rate Management
Transactions, and (f)&nbsp;all other obligations and liabilities of the Borrower to the Lender, now
existing or hereafter incurred, under, arising out of or in connection with any Loan Document, and
to the extent that any of the foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued, been earned and which remains
unpaid at each relevant time of determination.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Oil and Gas Properties</U>&#148; shall mean fee, leasehold, or other interests in or under
mineral estates or oil, gas, and other liquid or gaseous hydrocarbon leases with respect to
Properties situated in the United States or offshore from any State of the United States,
including, without limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests, and mineral fee interests,
together with contracts executed in connection therewith and all tenements, hereditaments,
appurtenances and Properties appertaining, belonging, affixed, or incidental thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>PBGC</U>&#148; shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA or any entity succeeding to any or all of its functions under ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Percentage Share</U>&#148; shall mean, as to each Lender, the percentage such Lender&#146;s
Facility Amount constitutes the sum of the Facility Amounts of all Lenders as such percentage is
shown in <U>Exhibit&nbsp;V.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Permitted Liens</U>&#148; shall mean (a)&nbsp;Liens for taxes, assessments, or other governmental charges
or levies not yet due or which (if foreclosure, distraint, sale, or other similar proceedings shall
not have been initiated) are being contested in good faith by appropriate proceedings, and such
reserve as may be required by GAAP shall have been made therefor, (b)&nbsp;Liens in connection with
workers&#146; compensation, unemployment insurance or other social security (other than Liens created by
Section&nbsp;4068 of ERISA), old-age pension, or public liability obligations which are not yet due or
which are being contested in good faith by appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefore, (c)&nbsp;Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of obligations which are not yet due
or which are being contested in good faith by
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefore,
(d)&nbsp;Liens in favor of operators and non-operators under joint operating agreements or similar
contractual arrangements arising in the ordinary course of the business of the Borrower to secure
amounts owing, which amounts are not yet due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by GAAP shall have been made therefore, (e)&nbsp;Liens
under production sales agreements, division orders, operating agreements, and other agreements
customary in the oil and gas business for processing, producing, and selling hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment therefore within 90&nbsp;days of
delivery, (f)&nbsp;easements, rights of way, restrictions, and other similar encumbrances, and minor
defects in the chain of title which are customarily accepted in the oil and gas financing industry,
none of which interfere with the ordinary conduct of the business of the Borrower or materially
detract from the value or use of the Property to which they apply, (h)&nbsp;Liens in favor of the Agent
and other Liens expressly permitted under the Security Instruments and (i)&nbsp;Liens not to exceed
$50,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Person</U>&#148; shall mean an individual, corporation, partnership, trust, unincorporated
organization, limited liability company, government, any agency or political subdivision of any
government, or any other form of entity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Plan</U>&#148; shall mean, at any time, any employee benefit plan which is covered by ERISA and in
respect of which the Borrower or any Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section&nbsp;4069 of ERISA be deemed to be) an &#147;employer&#148; as
defined in Section&nbsp;3(5) of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Principal Office</U>&#148; shall mean the principal office of the Lender in Dallas, Texas, presently
located at 833 Douglas Avenue, Dallas, <BR>
Texas 75225.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Prohibited Transaction</U>&#148; shall have the meaning assigned to such term in Section&nbsp;4975
of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Project Fields</U>&#148; shall mean the South Padre Island area fields 1113, 1059, 1060, 1073 and
1133 and North Padre Island area field 998.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Property</U>&#148; shall mean any interest in any kind of property or asset, whether real, personal
or mixed, tangible or intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&#147;<U>Rate Management Transaction</U>&#148; shall mean any transaction (including an agreement with
respect thereto) now existing or hereafter entered into between Borrower and Lenders which is a
rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction, forward
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">transaction, currency swap transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to any of these transactions) or
any combination thereof, whether linked to on or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Regulation&nbsp;D</u>&#148; shall mean Regulation&nbsp;D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Regulatory Change</U>&#148; shall mean the passage, adoption, institution, or amendment of
any federal, state, local, or foreign Requirement of Law (including, without limitation,
Regulation&nbsp;D), or any interpretation, directive, or request (whether or not having the force of
law) of any Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date and applying to a
class of banks including the Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reimbursement Obligation</U>&#148; shall mean the obligation of the Borrower to provide to
the Lenders or reimburse the Lenders for any amounts payable, paid, or incurred by the Lenders
with respect to Letters of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Release of Hazardous Substances</U>&#148; shall mean any emission, spill, release, disposal,
or discharge, except in accordance with a valid permit, license, certificate, or approval of the
relevant Governmental Authority, of any Hazardous Substance into or upon (a)&nbsp;the air, (b)&nbsp;soils or
any improvements located thereon, (c)&nbsp;surface water or groundwater, or (d)&nbsp;the sewer or septic
system, or the waste treatment, storage, or disposal system servicing any Property of the
Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reorganization</U>&#148; shall mean, with respect to any Multiemployer Plan, that such Plan is in
reorganization within the meaning of such term in Section&nbsp;4241 of ERISA.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reportable Event</U>&#148; shall mean any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty-day notice period is waived under
subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. &#167;2615.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Lenders</U>&#148; shall mean, Lenders (including the Agent) holding more than 66
2/3% of the then Loan Balance, or, if there is no Loan Balance, Lenders (including the Agent)
having more than 66 2/3% of the aggregate amount of the Commitments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Requirement of Law</U>&#148; shall mean, as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such Person, and any
applicable law, treaty, ordinance, order, judgment, rule, decree, regulation, or determination of
an arbitrator, court, or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">other Governmental Authority, including, without limitation, rules, regulations, orders, and
requirements for permits, licenses, registrations, approvals, or authorizations, in each case as
such now exist or may be hereafter amended and are applicable to or binding upon such Person or
any of its Property or to which such Person or any of its Property is subject.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Reserve Report</U>&#148; shall mean each report delivered to the Lender pursuant to Section&nbsp;5.7.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Responsible Officer</U>&#148; shall mean, as to any Person, its President, Chief Executive
Officer, Chief Operating Officer or any Vice President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Security Instruments</U>&#148; shall mean the security instruments executed and delivered in
satisfaction of the condition set forth in <BR>
Section&nbsp;3.1(f), and all other documents and instruments
at any time executed as security for all or any portion of the Obligations, as such instruments
may be amended, restated, or supplemented from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Single Employer Plan</U>&#148; shall mean any Plan which is covered by Title IV of ERISA, but
which is not a Multiemployer Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subordinated Debt</U>&#148; shall mean the debt described in the Subordination Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subordination Agreement</U>&#148; shall mean that agreement between Borrower, PrimeEnergy
Corporation and the Agent dated of even date herewith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148; shall mean, as to any Person, a corporation of which shares of stock having
ordinary voting power (other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of such corporation
are at the time owned, or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Superfund Site</U>&#148; shall mean those sites listed on the Environmental Protection Agency
National Priority List and eligible for remedial action or any comparable state registries or list
in any state of the United States.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Tangible Net Worth</U>&#148; shall mean (a)&nbsp;total assets, as would be reflected on a balance
sheet of the Borrower prepared in accordance with GAAP, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses, permits, and other intangible assets,
treasury stock, unamortized underwriters&#146; debt discount and expenses, and goodwill minus (b)&nbsp;total
liabilities, as would be reflected on a balance sheet of the Borrower prepared in accordance with
GAAP exclusive of Subordinated Debt.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Transferee</U>&#148; shall mean any Person to which any Lender has sold, assigned, transferred, or
granted a participation in any of the Obligations, as
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">authorized pursuant to Section&nbsp;9.1, and any Person acquiring, by purchase,
assignment, transfer, or participation, from any such purchaser, assignee,
transferee, or participant, any part of such Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>UCC</U>&#148; shall mean the Uniform Commercial Code as from time to time in effect in the
State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Undefined Financial Accounting Terms.</U> Undefined financial accounting terms
used in this Agreement shall be defined according to GAAP at the time in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>References.</U> References in this Agreement to Exhibit, Article, or Section numbers
shall be to Exhibits, Articles, or Sections of this Agreement, unless expressly stated to the
contrary. References in this Agreement to &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinafter,&#148; &#147;hereinabove,&#148;
&#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and words of similar import shall be to this Agreement in
its entirety and not only to the particular Exhibit, Article, or Section in which such
reference
appears.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Articles and Sections.</U> This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of
the
parties hereto shall be determined from this instrument as an entirety and without regard to
the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Number and Gender.</U> Whenever the context requires, reference herein made to
the single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural
shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated.
Words denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall
be
construed as cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 <U>Incorporation of Exhibits</U>. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all purposes.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE II</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>TERMS OF FACILITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Revolving Line of Credit.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 A. <U>Facility A and B Revolving Line of Credit,</U> (a)&nbsp;Upon the terms and conditions
(including, without limitation, the right of the Lender to decline to make any Loan so long as any
Default or Event of Default exists) and relying on the representations and warranties contained in
this Agreement, each Lender severally agrees, during the Commitment Period, to make Loans, in
immediately available funds at the Applicable Lending Office or the Principal Office, to or for the
benefit of the Borrower in an amount not to exceed at any time outstanding the lesser of the
Borrowing Base or the Percentage Share of such Lender of the Borrowing Base
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">then in effect for Facility A and Facility B, Loans shall be made from time to time on any
Business Day designated by the Borrower following receipt by the Agent of a Borrowing Request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Subject to the terms of this Agreement, during the Commitment Period,
the Borrower may borrow, repay, and reborrow and convert Loans of one type or with one
Interest Period into Loans of another type or with a different Interest Period. Except for
prepayments made pursuant to Section&nbsp;2.10, each borrowing, conversion, and prepayment of
principal of Loans shall be in an amount at least equal to $100,000. Each borrowing,
prepayment, or conversion of or into a Loan of a different type or, in the case of a LIBO Rate
Loan, having a different Interest Period, shall be deemed a separate borrowing, conversion, and
prepayment for purposes of the foregoing, one for each type of Loan or Interest Period.
Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of
LIBO Rate Loans having the same Interest Period shall be at least equal to $100,000; and if any
LIBO Rate Loan would otherwise be in a lesser principal amount for any period, such Loan shall
be a Floating Rate Loan during such period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Loans shall be made and maintained at the Applicable Lending Office
or the Principal Office and shall be evidenced by the Notes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Not later than 2:00 p.m., Central Standard or Central Daylight Time, as the
case may be, on the date specified for each borrowing, the Lenders shall make available, in
immediately available funds for such borrowing for the account of the Borrower. The amount so
received by the Agent shall, subject to the terms and conditions hereof, be made available to the
Borrower in immediately available funds at the Principal Office by the end of that Business Day.
All Loans by the Lenders shall be maintained at the Applicable Lending Office of the Lenders
and shall be evidenced by the Note of the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The face amounts of the Note has been established as an administrative
convenience and do not commit the Lenders to advance funds hereunder in excess of the then
current Borrowing Base.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1B.
<U>Facility C Revolving Line of Credit</U>. (a)&nbsp;Facility C shall be the lesser of the
Facility Amount of each Lender or the Percentage Share of each Lender of the Borrower Base then in
effect for Facility C (not to exceed $5,000,000). Loans shall be made from time to time on any
Business Day designated by the Borrower following receipt by the Agent of a Borrowing Request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The terms of Section&nbsp;2.1A(a), (b), (c), (d)&nbsp;and (e)&nbsp;are applicable to Facility C and are
incorporated herein by this reference.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2
<U>Letter of Credit Facility</U>, (a)&nbsp;Upon the terms and conditions and relying on the
representations and warranties contained in this Agreement, the Agent, as issuing bank for the
Lenders, agrees from the date of this Agreement until the date which is thirty days prior to the
Commitment Termination Date, to issue on behalf of the Lenders in their respective Percentage
Shares, Letters of Credit for the account of the Borrower and to renew and extend such Letters of
Credit. Letters of Credit shall be issued, renewed, or extended from time to time on any
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Business Day designated by the Borrower following the receipt in accordance with the terms hereof
by the Agent of the written (or oral, confirmed promptly in writing) request by a Responsible
Officer of the Borrower and a Letter of Credit Application. Letters of Credit shall be issued in
such amounts as the Borrower may request; provided, however, that (i)&nbsp;no Letter of Credit shall
have an expiration date which is more than 365&nbsp;days after the issuance thereof or subsequent to
Final Maturity, (ii)&nbsp;each automatically renewable Letter of Credit shall provide that it may be
terminated by the Agent at its then current expiry date by not less than 30&nbsp;days&#146; written notice by
the Agent to the beneficiary of such Letter of Credit, and (iii)&nbsp;the Agent shall not be obligated
to issue any Letter of Credit if (A)&nbsp;the face amount thereof would exceed the Available Commitment,
or (B)&nbsp;after giving effect to the issuance thereof, the L/C Exposure, when added to the Loan
Balance then outstanding, would exceed the Commitment Amount, or (C)&nbsp;the L/C Exposure would not
exceed $2,000,000 for Facility A and $2,000,000 for Facility B, never exceeding $2,000,000 in the
aggregate for Facility A and Facility B, and (iv)&nbsp;notwithstanding the above, Letters of Credit may
be issued for Commodity Hedge Agreements or Rate Management Transactions at the sole discretion of
the Agent up to an amount not to exceed $5,000,000 as evidenced by the Note shown on <U>Exhibit
1(A).</U> Any Letters of Credit issued under (iv)&nbsp;above shall be cross-collateralized and
cross-defaulted with the other Obligations hereunder and if drawn shall be due on demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to any payment in respect of any Letter of Credit, each Lender shall be deemed to be
a participant through the Agent with respect to the relevant Letter of Credit in the obligation of
the Agent, as the issuer of such Letter of Credit, in an amount equal to the Percentage Share of
such Lender of the maximum amount which is or at any time may become available to be drawn
thereunder. Upon delivery by such Lender of funds requested pursuant to Section&nbsp;2.2(c), such Lender
shall be treated as having purchased a participating interest in an amount equal to such funds
delivered by such Lender to the Agent in the obligation of the Borrower to reimburse the Agent, as
the issuer of such Letter of Credit, for any amounts payable, paid, or incurred by the Agent, as
the issuer of such Letter of Credit, with respect to such Letter of Credit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Each Lender shall be unconditionally and irrevocably liable, without regard to the
occurrence of any Default or Event of Default, to the extent of the Percentage Share of such Lender
at the time of issuance of each Letter of Credit, to reimburse, on demand, the Agent, as the issuer
of such Letter of Credit, for the amount of each Letter of Credit Payment under such Letter of
Credit. Each payment in respect of any Letter of Credit shall be deemed to be a Floating Rate Loan
by each Lender to the extent of funds delivered by such Lender to the Agent with respect to such
payment and shall to such extent be deemed a Floating Rate Loan under and shall be evidenced by the
Note of such Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)<B>&nbsp;EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE ISSUER OF EACH LETTER OF
CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE
AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF
THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF
ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES,</B>
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND
PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY
OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE
ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING,
WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF
THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT
NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR THE
PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE WHETHER
SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE
AGREEMENTS IN THIS SECTION 2.2(d) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND
THE TERMINATION OF THIS AGREEMENT.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3
<U>Use of Loan Proceeds and Letters of Credit.</U> (a)&nbsp;Proceeds of the Loan
shall be used solely to finance Borrower&#146;s share of capital expenditures for the development of the
Project Fields, to refinance shareholder debt and other projects and/or acquisitions evaluated by
and acceptable to the Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Letters of Credit shall be used solely for other general limited liability company
purposes and to support Commodity Hedge Agreements and Rate Management Transactions.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Interest.</U> Subject to the terms of this Agreement (including, without limitation,
Section&nbsp;2.17), interest on the Loans shall accrue and be payable at a rate per annum equal to the
Floating Rate for each Floating Rate Loan and the Adjusted LEBO Rate for each LIBO Rate Loan.
Interest on all Floating Rate Loans shall be computed on the basis of a year of 365 or 366&nbsp;days, as
applicable, for the actual days elapsed (including the first day but excluding the last day) during
the period for which payable. Interest on all LIBO Rate Loans shall be computed on the basis of a
year of 360&nbsp;days for the actual days elapsed (including the first day but excluding the last day)
during the period for which payable. Notwithstanding the foregoing, interest on past-due
principal and, to the extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366&nbsp;days, as the case may be, for
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the actual days elapsed (including the first day but excluding the last day) during the period for
which payable, and shall be payable upon demand by the Lender at any time as to all or any portion
of such interest. In the event that the Borrower fails to select the duration of any Interest
Period for any LIBO Rate Loan within the time period and otherwise as provided herein, such Loan
(if outstanding as a LIBO Rate Loan) will be automatically converted into a Floating Rate Loan on
the last day of the then current Interest Period for such Loan or (if outstanding as a Floating
Rate Loan) will remain as, or (if not then outstanding) will be made as, a Floating Rate Loan.
Interest provided for herein shall be calculated on unpaid sums actually advanced and outstanding
pursuant to the terms of this Agreement and only for the period from the date or dates of such
advances until repayment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Repayment of Loans and Interest.</U> Accrued and unpaid interest on each
outstanding Floating Rate Loan shall be due and payable monthly commencing on the first day of
August&nbsp;2006, and continuing on the first day of each calendar month thereafter while any Floating
Rate Loan remains outstanding, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on each
outstanding LIBO Rate Loan shall be due and payable on the last day of the Interest Period for such
LIBO Rate Loan corresponding to the day of the calendar month on which such Interest Period
commenced, the payment in each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Loan. The Loan Balance, together with all accrued and unpaid
interest thereon, shall be due and payable at Final Maturity. At the time of making each payment
hereunder or under the Note, the Borrower shall specify to the Lender the Loans or other amounts
payable by the Borrower hereunder to which such payment is to be applied. In the event the Borrower
fails to so specify, or if an Event of Default has occurred and is continuing, the Lender may apply
such payment as it may elect in its sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Outstanding Amounts.</U> The outstanding principal balance of the Notes reflected by
the notations by the Lenders on their records shall be deemed rebuttably presumptive evidence of
the principal amount owing on the Notes. The liability for payment of principal and interest
evidenced by the Notes shall be limited to principal amounts actually advanced and outstanding
pursuant to this Agreement and interest on such amounts calculated in accordance with this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Time, Place, and Method of Payments.</U> All payments required pursuant to this
Agreement or the Notes shall be made in lawful money of the United States of America and in
immediately available funds, shall be deemed received by the Lender on the Business Day received,
or on the next Business Day following receipt if such receipt is after 2:00 p.m., Central Standard
or Central Daylight Time, as the case may be, on any Business Day, and shall be made at the
Principal Office. Except as provided to the contrary herein, if the due date of any payment
hereunder or under the Notes would otherwise fall on a day which is not a Business Day, such date
shall be extended to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8
<U>Pro Rata Treatment: Adjustments.</U> (a)&nbsp;Except to the extent otherwise expressly
provided herein, (i)&nbsp;each borrowing pursuant to this Agreement shall be made from the Lenders pro
rata in accordance with their respective Percentage Shares, (ii)&nbsp;each reduction of the sum of
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Facility Amounts of the Lenders at the request of the Borrower, as well as any subsequent
increase in the sum of the Facility Amounts of the Lenders at the request of the Borrower and with
written agreement of the Agent and the Required Lenders shall serve to adjust the Facility Amounts
of the Lenders pro rata in accordance with the Facility Amounts of the Lenders in effect
immediately prior to any such adjustment, (iii)&nbsp;each payment by the Borrower of fees shall be made
for the account of the Lenders pro rata in accordance with their respective Percentage Shares, (iv)
each payment of principal of Loans shall be made for the account of the Lenders pro rata in
accordance with their Percentage Shares of the Loan Balance, and (v)&nbsp;each payment of interest on
Loans shall be made for the account of the Lenders pro rata in accordance with their Percentage
Shares of the aggregate amount of interest due and payable to the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Agent shall distribute all payments with respect to the Obligations to the Lenders
promptly upon receipt in like funds as received. In the event that any payments made hereunder by
the Borrower at any particular time are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (i)&nbsp;first, to fees and expenses due pursuant
to the terms of this Agreement or any other Loan Document, (ii)&nbsp;second, to accrued interest, (iii)
third, to the Loan Balance, and (iv)&nbsp;last, to any other Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If any Lender (for purposes of this Section, a &#147;<U>Benefitted Lender</U>&#148;) shall at any time
receive any payment of all or part of its portion of the Obligations, or receive any Collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in <U>Section&nbsp;7.1(f)</U>
or <U>Section&nbsp;7.1(g),</U> or
otherwise) in an amount greater than such Lender was entitled to receive pursuant to the terms
hereof, such Benefitted Lender shall purchase for cash from the other Lenders such portion of the
Obligations of such other Lenders, or shall provide such other Lenders with the benefits of any
such Collateral or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such Collateral or proceeds with each of the Lenders
according to the terms hereof. If all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be rescinded and the purchase
price and benefits returned by such Lender, to the extent of such recovery, but without interest.
The Borrower agrees that each such Lender so purchasing a portion of the Obligations of another
Lender may exercise all rights of payment (including rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion. If any Lender ever
receives, by voluntary payment, exercise of rights of set-off or banker&#146;s lien, counterclaim,
cross-action or otherwise, any funds of the Borrower to be applied to the Obligations, or receives
any proceeds by realization on or with respect to any Collateral, all such funds and proceeds shall
be forwarded immediately to the Agent for distribution in accordance with the terms of this
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9
<U>Borrowing Base Determinations.</U> (a)&nbsp;The Borrowing Base as of the Closing Date is
acknowledged by the Borrower and the Lender to be $0 for Facility A, $18,500,000 for Facility B and
$5,000,000 for Facility C. The Facility A Borrowing Base will be comprised of Borrower&#146;s proved
developed producing properties. The Facility B Borrowing Base will be comprised of Borrower&#146;s
proved developed shut-in properties. The Facility C Borrowing Base will be comprised of Borrower&#146;s
20% general partner interest in FWOE Partners L.P. Notwithstanding the foregoing, the maximum
aggregate Borrowing Base for Facility A, B and C may never exceed $80,000,000.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Borrowing Base shall be redetermined semi-annually on the basis of information
supplied by the Borrower in compliance with the provisions of this Agreement, including, without
limitation, Reserve Reports, and all other relevant information
available to the Lenders. In addition, the Agent shall, in the normal course of business following a request of the Borrower,
redetermine the Borrowing Base; provided, however, the Lenders shall not be obligated to respond to
no more than ten such requests during 2006 and two such requests in each subsequent calendar year.
The Borrower may make additional requests for which agreement will not be unreasonably withheld
by the Lenders. Notwithstanding the foregoing, the Lenders may at their discretion redetermine the
Borrowing Base as set forth in Section&nbsp;2.9(a) at any time and from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Borrowing Base for Facility A shall be activated and redetermined following the
completion of facilities and pipeline and Ryder Scott Company classification of the reserves of the
successful wells in each Project Field as proved developed producing. The Borrowing Base for
Facility B will be redetermined following the completion, testing and Ryder Scott Company
classification of the reserves of each of the successful wells in each Project Field as proved
developed shut-in. The Borrowing Base for Facility C will be redetermined each time Facility A or
Facility B is redetermined.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Upon each determination of the Borrowing Base by the Lenders, the Agent shall notify the
Borrower orally (confirming such notice promptly in writing) of such determination, and the
Borrowing Base so communicated to the Borrower shall become effective upon such written
notification and shall remain in effect until the next subsequent determination of the Borrowing
Base and the monthly amount by which the Borrowing Base shall be reduced.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The Borrowing Base shall represent the determination by the Lenders, in accordance with
the applicable definitions and provisions herein contained and their customary lending practices
for loans of this nature, of the value, for loan purposes, of the Mortgaged Properties, subject, in
the case of any increase in the Borrowing Base, to the credit approval process of the Lenders.
Furthermore, the Borrower acknowledges that the determination of the Borrowing Base contains an
equity cushion (market value in excess of loan value), which is acknowledged by the Borrower to be
essential for the adequate protection of the Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10 <U>Mandatory Prepayments.</U> If at any time the sum of the Loan Balance for Facility A,
B and C and the L/C Exposure (for Facility A and Facility B) exceeds the Borrowing Base then in
effect and exceeds the Borrowing Base for Facility A, B and C, the Borrower shall, within 5
Business Days of notice from the Lenders of such occurrence, (a)&nbsp;prepay, or make arrangements
acceptable to the Lenders for the prepayment of, the amount of such excess for application on the
Loan Balance (for the applicable Facility), (b)&nbsp;provide additional collateral, of character and
value satisfactory to the Lenders in their reasonable discretion, to secure the Obligations by the
execution and delivery to the Agent of security instruments in form and substance satisfactory to
the Agent in the exercise of its reasonable discretion, or (c)&nbsp;effect any combination of the
alternatives described in clauses (a)&nbsp;and (b)&nbsp;of this Section and acceptable to the Agent in its
reasonable discretion. In the event that a mandatory prepayment is required under this Section and
the amount owed on the Notes plus accrued interest is less than the amount required to be prepaid,
the Borrower shall repay the amount owed on the applicable Facility, plus accrued interest and, in
accordance with the provisions of the relevant Letter of
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Credit Applications executed by the Borrower or otherwise to the reasonable satisfaction of the
Agent, deposit with the Agent, as additional collateral securing the Obligations, an amount of
cash, in immediately available funds, equal to the L/C Exposure minus the Borrowing Base. The cash
deposited with the Agent in satisfaction of the requirement provided in this Section may be
invested, at the reasonable discretion of the Agent and then only at the express direction of the
Borrower as to investment vehicle and maturity (which shall be no later than the latest expiry date
of any then outstanding Letter of Credit), for the account of the Borrower in cash or cash
equivalent investments offered by or through the Agent.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.11 <U>Voluntary Prepayments and Conversions of Loans.</U> Subject to applicable
provisions of this Agreement, the Borrower shall have the right at any time or from time to time to
prepay Loans and to convert Loans of one type or with one Interest Period into Loans of another
type or with a different Interest Period; provided, however, that (a)&nbsp;the Borrower shall give the
Lender notice of each such prepayment or conversion of all or any portion of a LIBO Rate Loan no
less than two Business Days prior to prepayment or conversion, (b)&nbsp;any LIBO Rate Loan may be
prepaid or converted only on the last day of an Interest Period for such Loan, (c)&nbsp;the Borrower
shall pay all accrued and unpaid interest on the amounts prepaid or converted, and (d)&nbsp;no such
prepayment or conversion shall serve to postpone the repayment when due of any Obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.12
<U>Commitment Fee.</U> In addition to interest on the Notes as provided herein and all
other fees payable hereunder and to compensate the Lenders for maintaining funds available, the
Borrower shall pay to the Agent for the account of the Lenders, in immediately available funds, on
the first day of July, 2006, and on the first day of each third calendar month thereafter during
the Commitment Period, a fee in the amount of .375% per annum, calculated on the basis of a year of
365 or 366&nbsp;days, as the case may be, for the actual days elapsed (including the first day but
excluding the last day), on the average daily amount of the Available Commitment during the
preceding quarterly period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.13 <U>Facility Fee.</U> The Borrower shall pay the Facility Fees as set forth in the Fee
Agreement of even date herewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.14 <U>Letter of Credit Fee.</U> In addition to interest on the Note as provided herein and
all other fees payable hereunder, the Borrower agrees to pay to the Agent for the account of the
Lenders, on the date of issuance of each Letter of Credit, a fee equal to the greater of $500 or
2.00% calculated on the basis of a year of 365 or 366&nbsp;days, as the case may be, for the actual days
elapsed (including the first day but excluding the last day), on the face amount of such Letter of
Credit during the period for which such Letter of Credit is issued; provided, however, in the event
such Letter of Credit is canceled prior to its original expiry date or a payment is made by the
Lender with respect to such Letter of Credit, the Lender shall, within 30&nbsp;days after such
cancellation or the making of such payment, rebate to the Borrower the unearned portion of such
fee. The Borrower also agrees to pay to the Lender on demand its customary letter of credit
transactional fees, including, without limitation, amendment fees, payable with respect to each
Letter of Credit.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.15 <U>Loans to Satisfy Obligations of Borrower.</U> The Lenders may, but shall not be
obligated to, but only if an Event of Default exists, make Loans for the benefit of the Borrower
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and apply proceeds thereof to the satisfaction of any condition, warranty, representation, or
covenant of the Borrower contained in this Agreement or any other Loan Document. Any such Loan
shall be evidenced by the Note and shall be made as a Floating Rate Loan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.16 <U>Security Interest in Accounts; Right of Offset.</U> As security for the payment and
performance of the Obligations, the Borrower hereby transfers, assigns, and pledges to the Agent
for the benefit of the Lenders and grants to the Agent for the benefit of the Lenders a security
interest in all funds of the Borrower now or hereafter or from time to time on deposit with the
Agent and such Lender, with such interest of the Lender to be retransferred, reassigned, and/or
released by the Agent and each Lender, as the case may be, at the expense of the Borrower upon
payment in full and complete performance by the Borrower of all Obligations. All remedies as
secured party or assignee of such funds shall be exercisable by the Lender during the existence of
the occurrence of any Event of Default, regardless of whether the exercise of any such remedy would
result in any penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof. Furthermore, the Borrower
hereby grants to the Agent and each Lender the right, exercisable during the existence of an Event
of Default, of offset or banker&#146;s lien against all funds of the Borrower now or hereafter or from
time to time on deposit with the Agent and each Lender, regardless of whether the exercise of any
such remedy would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity thereof, provided
that such Obligation shall have matured, whether by acceleration of maturity or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.17
<U>General Provisions Relating to Interest.</U> (a)&nbsp;It is the intention of the parties
hereto to comply strictly with the usury laws of the State of Texas and the United States of
America. In this connection, there shall never be collected, charged, or received on the sums
advanced hereunder interest in excess of that which would accrue at the Highest Lawful Rate. For
purposes of Chapter&nbsp;303 of the Texas Finance Code (Vernon&#146;s 1999), the Borrower agrees that the
Highest Lawful Rate shall be the &#147;weekly ceiling&#148; as defined in such Section, provided that the
Lenders may also rely, to the extent permitted by applicable laws of the State of Texas or the
United States of America, on alternative maximum rates of interest under other laws of the State of
Texas or the United States of America applicable to the Lender, if greater.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Notwithstanding anything herein or in the Note to the contrary, during any Limitation
Period, the interest rate to be charged on amounts evidenced by the Note shall be the Highest
Lawful Rate, and the obligation, if any, of the Borrower for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any period or periods of
time following a Limitation Period, to the extent permitted by applicable laws of the State of
Texas or the United States of America, the interest rate to be charged hereunder shall remain at
the Highest Lawful Rate until such time as there has been paid to the Lender (i)&nbsp;the amount of
interest in excess of that accruing at the Highest Lawful Rate that the Lender would have received
during the Limitation Period had the interest rate remained at the otherwise applicable rate, and
(ii)&nbsp;all interest and fees otherwise payable to the Lender but for the effect of such Limitation
Period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If, under any circumstances, the aggregate amounts paid on the Note or under this
Agreement or any other Loan Document include amounts which by law are deemed interest and which
would exceed the amount permitted if the Highest Lawful Rate were in effect,
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Borrower stipulates that such payment and collection will have been and will be deemed to have
been, to the extent permitted by applicable laws of the State of Texas or the United States of
America, the result of mathematical error on the part of the Borrower and the Lender; and the
Lenders shall promptly refund the amount of such excess (to the extent only of such interest
payments in excess of that which would have accrued and been payable on the basis of the Highest
Lawful Rate) upon discovery of such error by the Lender or notice thereof from the Borrower. In
the event that the maturity of any Obligation is accelerated, by reason of an election by the
Lender or otherwise, or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never exceed the Highest Lawful
Rate; and excess amounts paid which by law are deemed interest, if any, shall be credited by the
Lender on the principal amount of the Obligations, or if the principal amount of the Obligations
shall have been paid in full, refunded to the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;All sums paid, or agreed to be paid, to the Lender for the use, forbearance and detention
of the proceeds of any advance hereunder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term hereof until paid in full so
that the actual rate of interest is uniform but does not exceed the Highest Lawful Rate throughout
the full term hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.18
<U>Yield Protection.</U> (a)&nbsp;Without limiting the effect of the other provisions of
this Section (but without duplication), the Borrower shall pay to the Lenders from time to time
such amounts as the Lenders may determine are necessary to compensate it for any Additional Costs
incurred by the Lenders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), the Borrower shall pay to the Lenders from time to time on request such amounts as
the Lenders may determine are necessary to compensate the Lender for any costs attributable to the
maintenance by the Lenders (or any Applicable Lending Office), pursuant to any Regulatory Change,
of capital in respect of the Commitment, such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of the Lender (or any
Applicable Lending Office) to a level below that which the Lender (or any Applicable Lending
Office) could have achieved but for such Regulatory Change.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), in the event that any Requirement of Law or Regulatory Change or the compliance by
the Lenders therewith shall (i)&nbsp;impose, modify, or hold applicable any reserve, special deposit, or
similar requirement against any Letter of Credit or obligation to issue Letters of Credit, or (ii)
impose upon the Lenders any other condition regarding any Letter of Credit or obligation to issue
Letters of Credit, and the result of any such event shall be to increase the cost to the Lenders of
issuing or maintaining any Letter of Credit or obligation to issue Letters of Credit or any
liability with respect to payments by the Lenders under Letters of Credit, or to reduce any amount
receivable in connection therewith, then within 15&nbsp;days of demand by the Lenders, the Borrower
shall pay to the Lenders, from time to time as specified by the Lender, additional amounts which
shall be sufficient to compensate the Lenders for such increased cost or reduced amount receivable.
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Without limiting the effect of the other provisions of this Section (but without
duplication), the Borrower shall pay to the Lenders such amounts as shall be sufficient in the
reasonable opinion of the Lender to compensate it for any loss, cost, or expense incurred by and as
a result of:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any payment, prepayment, or conversion by the Borrower of a
LIBO Rate Loan on a date other than the last day of an Interest
Period for such Loan; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) any failure by the Borrower to borrow a LIBO Rate Loan
from the Lenders on the date for such borrowing specified in the
relevant Borrowing Request;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">such compensation to include, without limitation, with respect to any LIBO Rate Loan, an amount
equal to the excess, if any, of (A)&nbsp;the amount of interest which would have accrued on the
principal amount so paid, prepaid, converted, or not borrowed for the period from the date of such
payment, prepayment, conversion, or failure to borrow to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date of such failure to borrow) at the applicable rate of
interest for such Loan provided for herein over (B)&nbsp;the interest component (as reasonably
determined by the Lender) of the amount (as reasonably determined by the Lenders) the Lenders
would have bid in the London interbank market for Dollar deposits of amounts comparable to such
principal amount and maturities comparable to such period; provided, however, that the Lenders
shall be limited to recover their actual losses, and not anticipated profits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Determinations by the Lenders for purposes of this Section of the effect of any Regulatory
Change on capital maintained, their costs or rate of return, maintaining Loans, issuing Letters of
Credit, its obligation to make Loans and issue Letters of Credit, or on amounts receivable by it in
respect of Loans, Letters of Credit, or such obligations, and the additional amounts required to
compensate the Lenders under this Section shall be rebuttable presumptions of the additional
amounts due, provided that such determinations are made on a reasonable basis. The Lenders shall
furnish the Borrower with a certificate setting forth in reasonable detail the basis and amount of
increased costs incurred or reduced amounts receivable as a result of any such event, and the
statements set forth therein shall be rebuttable presumptions of the additional amounts due. The
Lenders shall (i)&nbsp;notify the Borrower, as promptly as practicable after the Lender obtains
knowledge of any Additional Costs or other sums payable pursuant to this Section and determines to
request compensation therefore, of any event occurring after the Closing Date which will entitle
the Lenders to compensation pursuant to this Section; provided that the Borrower shall not be
obligated for the payment of any Additional Costs or other sums payable pursuant to this Section
after the earlier of (A)&nbsp;the Final Maturity (provided that the Obligations have been paid in full)
and (B)&nbsp;the expiration of the Commitment (provided that the Obligations have been paid in full) to
the extent such Additional Costs or other sums accrued more than 90&nbsp;days prior to the date upon
which the Borrower was given such notice; and (ii)&nbsp;designate a different Applicable Lending Office
for the Loans of the Lenders affected by such event if such designation will avoid the need for or
reduce the amount of such compensation and will not, in the sole opinion of the Lenders, be
materially disadvantageous to the Lenders. If the Lenders request compensation from the Borrower
under this Section, the Borrower may, by
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">notice to the Lenders, require that the Loans by the Lenders of the type with respect to which
such compensation is requested be converted into Floating Rate Loans in accordance with Section
2.11. Any compensation requested by the Lenders pursuant to this Section shall be due and payable
to the Lenders within fifteen days of delivery of any such notice by the Lenders to the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The Lenders agree that it shall not request, and the Borrower shall not be obligated to
pay, any Additional Costs or other sums payable pursuant to this Section unless similar additional
costs and other sums payable are also generally assessed by the Lenders against other customers of
the Lenders similarly situated where such customers are subject to documents providing for such
assessment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.19 <U>Limitation on Types of Loans.</U> Anything herein to the contrary notwithstanding,
no more than 5 separate Loans shall be outstanding at any one time, with, for purposes of this
Section, all Floating Rate Loans constituting one Loan and all LIBO Rate Loans for the same
Interest Period constituting one Loan. Anything herein to the contrary notwithstanding, if, on or
prior to the determination of any interest rate for any LIBO Rate Loan for any Interest Period
therefor:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Lenders determine (which determination shall be conclusive) that
quotations of interest rates for the deposits referred to in the definition of &#147;LIBO
Rate&#148; in Section&nbsp;1.2 are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such Loan as provided
in this Agreement; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Lenders determine (which determination shall be conclusive) that the rates
of interest referred to in the definition of &#147;LIBO Rate&#148; in Section&nbsp;1.2 upon the basis
of which the rate of interest for such Loan for such Interest Period is to be
determined do not accurately reflect the cost to the Lenders of making or maintaining
such Loan for such Interest Period,
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">then the Lenders shall give the Borrower prompt notice thereof; and so long as such condition
remains in effect, the Lenders shall be under no obligation to make LIBO Rate Loans or to convert
Loans of any other type into LIBO Rate Loans, and the Borrower shall, on the last day of the then
current Interest Period for each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or
convert such Loan into another type of Loan in accordance with Section&nbsp;2.11. Before giving such
notice pursuant to this Section, the Lenders will designate a different available Applicable
Lending Office for LIBO Rate Loans or take such other action as the Borrower may request if such
designation or action will avoid the need to suspend the obligation of the Lenders to make LIBO
Rate Loans hereunder and will not, in the opinion of the Lenders, be materially disadvantageous to
the Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.20 <U>Illegality.</U> Notwithstanding any other provision of this Agreement, in the event
that it becomes unlawful for the Lenders or their Applicable Lending Office to (a)&nbsp;honor its
obligation to make any type of LIBO Rate Loans hereunder, or (b)&nbsp;maintain any type of LIBO Rate
Loans hereunder, then the Lender shall promptly notify the Borrower thereof; and the obligation of
the Lenders hereunder to make such type of LIBO Rate Loans and to convert other
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">types of Loans into LIBO Rate Loans of such type shall be suspended until such time as the Lenders
may again make and maintain LIBO Rate Loans of such type, and the outstanding LIBO Rate Loans of
such type shall be converted into Floating Rate Loans in accordance with Section&nbsp;2.11. Before
giving such notice pursuant to this Section, the Lenders will designate a different available
Applicable Lending Office for LIBO Rate Loans or take such other action as the Borrower may
request if such designation or action will avoid the need to suspend the obligation of the Lenders
to make LIBO Rate Loans and will not, in the opinion of the Lender, be disadvantageous to the
Lenders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.21 <U>Regulatory Change.</U> In the event that by reason of any Regulatory Change, the
Lenders (a)&nbsp;incur Additional Costs based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of the Lenders which includes deposits by
reference to which the interest rate on any LIBO Rate Loan is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lenders which includes any
LIBO Rate Loan, or (b)&nbsp;becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, at the election of the Lenders with notice to the
Borrower, the obligation of the Lenders to make such LIBO Rate Loans and to convert Floating Rate
Loans into such LIBO Rate Loans shall be suspended until such time as such Regulatory Change ceases
to be in effect, and all such outstanding LIBO Rate Loans shall be converted into Floating Rate
Loans in accordance with Section&nbsp;2.11.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.22 <U>Limitations on Interest Periods.</U> Each Interest Period selected by the Borrower
(a)&nbsp;which commences on the last Business Day of a calendar month (or, with respect to any LIBO Rate
Loan, any day for which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent calendar month,
(b)&nbsp;which would otherwise end on a day which is not a Business Day shall end on the next succeeding
Business Day (or, with respect to any LIBO Rate Loan, if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day), (c)&nbsp;which would otherwise
commence before and end after Final Maturity shall end on Final Maturity, and (d)&nbsp;shall have a
duration of not less than one month, as to any LIBO Rate Loan, and, if any Interest Period would
otherwise be a shorter period, the relevant Loan shall be a Floating Rate Loan during such period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.23 <U>Letters in Lieu of Transfer Orders.</U> The Agent agrees that none of the letters in
lieu of transfer or division orders provided by the Borrower pursuant to Section&nbsp;3.1(f)(iii) or
Section&nbsp;5.10 will be sent to the addressees thereof prior to the occurrence of an Event of Default,
at which time the Agent may, at its option and in addition to the exercise of any of its other
rights and remedies, send any or all of such letters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.24 <U>Power of Attorney.</U> The Borrower hereby designates the Agent as its Agent and
attorney-in-fact, to act in its name, place, and stead for the purpose of completing and, upon the
occurrence of an Event of Default, delivering any and all of the letters in lieu of transfer orders
delivered by the Borrower to the Agent pursuant to Section&nbsp;3.1(f)(iii) or Section&nbsp;5.10, including,
without limitation, completing any blanks contained in such letters and attaching exhibits thereto
describing the relevant Collateral. The Borrower hereby ratifies and confirms all that the Agent
shall lawfully do or cause to be done by virtue of this power of attorney and the rights granted
with respect to such power of attorney. This power of attorney is coupled with the interests of
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Agent in the Collateral, shall commence and be in full force and effect as of the Closing Date
and shall remain in full force and effect and shall be irrevocable so long as any Obligation
remains outstanding or unpaid or any Commitment exists. The powers conferred on the Agent by this
appointment are solely to protect the interests of the Agent under the Loan Documents and shall
not impose any duty upon the Agent to exercise any such powers. The Agent shall be accountable
only for amounts that it actually receives as a result of the exercise of such powers and shall
not be responsible to the Borrower or any other Person for any act or failure to act with respect
to such powers, except for gross negligence or willful misconduct.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE III</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>CONDITIONS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Agent and the Lenders to enter into this Agreement and to make
Loans and issue Letters of Credit are subject to the satisfaction of the following conditions
precedent:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Receipt of Loan Documents and Other Items.</U> The Lenders shall have no obligation
under this Agreement unless and until all matters incident to the consummation of the transactions
contemplated herein, including, without limitation, the review by the Agent or its counsel of the
title of the Borrower to its Oil and Gas Properties, shall be satisfactory to the Agent, and the
Agent shall have received, reviewed, and approved the following documents and other items,
appropriately executed when necessary and, where applicable, acknowledged by one or more authorized
officers of the Borrower, all in form and substance satisfactory to the Lender and dated, where
applicable, of even date herewith or a date prior thereto and acceptable to the Lender:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) multiple counterparts of this Agreement, as requested by the Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Notes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) copies of the formation documents of the Borrower and all amendments thereto,
accompanied by a certificate dated the Closing Date issued by the secretary or an
assistant secretary or another authorized representative of the Borrower to the effect
that each such copy is correct and complete;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) a certificate of incumbency dated the Closing Date, including specimen
signatures of all officers or other representatives of the Borrower who are authorized
to execute Loan Documents on behalf of the Borrower, such certificate being executed
by the manager or another authorized representative of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) copies of resolutions of the Borrower, adopted by the board of directors of
the Borrower approving the Loan Documents to which the Borrower is a party and
authorizing the transactions contemplated herein and therein, accompanied by a
certificate dated the Closing Date issued by the manager or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">another authorized representative of the Borrower to the effect that such copies are true and
correct copies of resolutions duly adopted and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not been amended, modified, or
rescinded in any respect, and are in full force and effect as of the date of such certificate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) multiple counterparts, as requested by the Agent, of the following Security Instruments
creating, evidencing, perfecting, and otherwise establishing Liens in favor of the Lender in and to
the Collateral:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Mortgage and Deed of Trust, Indenture, Security Agreement, Assignment
of Production, and Financing Statement from the Borrower covering all Oil and
Gas Properties of the Borrower in the current Borrowing Base and all
improvements, personal property, and fixtures related thereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Financing Statements from the Borrower, as debtor, constituent to the
instrument described in clause (i)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) undated letters, in form and substance satisfactory to the Lender,
from the Borrower to each purchaser of production and disburser of the proceeds
of production from or attributable to the Mortgaged Properties, together with
additional letters with the addressees left blank, authorizing and directing the
addressees to make future payments attributable to production from the Mortgaged
Properties directly to the Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Security Agreement from the Borrower pledging all accounts, contract
rights, etc.;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Financing Statements from the Borrower, as debtor, constituent to the
instrument described in clause (iv)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Pledge Agreement from the Borrower pledging its general partner
interest in FWOE Partners L.P.;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Financing Statements from the Borrower, as debtor, constituent to the
instrument described in clause (vi)&nbsp;above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) certificates dated as of a recent date from the Secretary of State or other appropriate
Governmental Authority evidencing the existence or qualification and good standing of
the Borrower in its jurisdictions of formation and in any other jurisdictions where it does
business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) unaudited Financial Statements of the Borrower as of March&nbsp;31, 2006;
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) results of searches of the UCC Records of the Secretary of State of the
States of Texas, Delaware, and Louisiana from a source acceptable to the Lender and
reflecting no Liens against any of the Collateral as to which perfection of a Lien
is accomplished by the filing of a financing statement other than in favor of the
Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) confirmation, acceptable to the Lender, of the title of the Borrower to
the Mortgaged Properties, free and clear of Liens other than Permitted Liens;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) all operating, lease, sublease, royalty, sales, exchange, processing,
farm-out, bidding, pooling, unitization, communitization, and other material
agreements relating to the Mortgaged Properties reasonably requested by the Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) engineering reports covering the Mortgaged Properties;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) the opinion of James Gilbert, counsel to the Borrower, in the form
attached hereto as Exhibit&nbsp;IV, with such changes thereto as may be approved by the
Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) certificates evidencing the insurance coverage required pursuant to
Section&nbsp;5.21;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) payment of the fees covered by the Fee Agreement of even date herewith;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) payment of the fees described in Section&nbsp;5.17;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) Subordination Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) Completion and Liquidity Maintenance Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) copy of Put Right Agreement between Borrower and PrimeEnergy Corporation
acceptable to the Agent; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) such other agreements, documents, instruments, opinions, certificates,
waivers, consents, and evidence as the Lender may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Each Loan and Letter of Credit.</U> In addition to the conditions precedent stated
elsewhere herein, the Lenders shall not be obligated to make any Loan or issue any Letter of Credit
unless:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Borrower shall have delivered to the Agent a Borrowing Request at least
the requisite time prior to the requested date for the relevant Loan, or a Letter of
Credit Application at least three Business Days prior to the requested issuance date
for the relevant Letter of Credit; and each statement or certification made in such
Borrowing Request or Letter of Credit Application, as
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">the case may be, shall be true and correct in all material respects on the requested date for such
Loan or the issuance of such Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) no Event of Default or Default shall exist or will occur as a result of the making of the
requested Loan or the issuance of the requested Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if requested by the Agent, the Borrower shall have delivered evidence satisfactory to the
Agent substantiating any of the material matters contained in this Agreement which are necessary to
enable the Borrower to qualify for such Loan or the issuance of such Letter of Credit;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) no event shall have occurred which, in the reasonable opinion of the Lender, would have a
Material Adverse Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) each of the representations and warranties contained in this Agreement shall be true and
correct and shall be deemed to be repeated by the Borrower as if made on the requested date for
such Loan or the issuance of such Letter of Credit (except to the extent such representations and
warranties expressly refer to an earlier date, in which case, they shall be true and correct as of
such earlier date) provided, however, for purposes of this Section&nbsp;3.2, in each representation and
warranty in Article&nbsp;IV that makes reference to an Exhibit, the representation under this Section
3.2 that such representation and warranty in Article&nbsp;IV is true on and as of the date of the making
of such Loan or the issuance of such Letter of Credit shall take into account (i)&nbsp;any subsequent
amendments to any Exhibit referred to therein, (ii)&nbsp;any exception contained in a written notice
received by the Lender which makes specific reference to the applicable Exhibit, or (iii)&nbsp;any
written disclosure made by the Borrower or any of its Subsidiaries prior to the date as of which
such representation or warranty is made, provided that such amendment, exception or disclosure has
been consented to by the Lender if such amendment, exception or disclosure amends or waives
provisions of this Agreement or is otherwise required under the terms of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all of the Security Instruments shall be in full force and effect and provide to the
Lenders the security intended thereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) neither the consummation of the transactions contemplated hereby nor the making of such
Loan or the issuance of such Letter of Credit shall contravene, violate, or conflict with any
Requirement of Law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Borrower shall hold full legal title to the Collateral and be the sole beneficial
owner thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Agent and the Lenders shall have received the payment of all fees payable to the
Agent and the Lenders hereunder and reimbursement from the Borrower, or special legal counsel for
the Agent shall have received payment from the Borrower, for (i)&nbsp;all reasonable fees and expenses
of counsel to the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 31 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Agent for which the Borrower is responsible pursuant to applicable provisions of
this Agreement and for which invoices have been presented at least 15&nbsp;days prior to
the date of the relevant Loan or Letter of Credit Application (otherwise the initial
Borrowing which must be presented at least two days prior to the Closing Date), and
(ii)&nbsp;estimated fees charged by filing officers and other public officials incurred
or to be incurred in connection with the filing and recordation of any Security
Instruments, for which invoices have been presented as of or prior to the date of
the requested Loan or Letter of Credit Application (otherwise the initial Borrowing
which must be presented at least five days prior to the Closing Date); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) all matters incident to the consummation of the transactions hereby
contemplated shall be satisfactory to the Lender.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IV</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To induce the Agent and the Lenders to enter into this Agreement and to make the Loans
and issue Letters of Credit, the Borrower represents and warrants to the Agent and the Lenders
(which representations and warranties shall survive the delivery of the Notes) that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Due Authorization.</U> The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the Borrower of the Note, the
repayment of the Notes and interest and fees provided for in the Notes and this Agreement, the
execution and delivery of the Security Instruments by the Borrower and the performance of all
obligations of the Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary limited liability company action by the Borrower, and do not
and will not (a)&nbsp;require the consent of any Governmental Authority, (b)&nbsp;contravene or conflict with
any Requirement of Law, (c)&nbsp;contravene or conflict with any indenture, instrument, or other
agreement to which the Borrower is a party or by which any Property of the Borrower may be
presently bound or encumbered, except where such contravention or conflict would not individually
or in the aggregate result in a Material Adverse Effect, or (d)&nbsp;result in or require the creation
or imposition of any Lien in, upon or of any Property of the Borrower under any such indenture,
instrument, or other agreement, other than the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Limited Liability Company Existence.</U> The Borrower is a limited liability
company duly organized, legally existing, and in good standing under the laws of its state of
formation and is duly qualified as foreign limited liability company and is in good standing in all
jurisdictions wherein the ownership of Property or the operation of its business necessitates same,
other than those jurisdictions wherein the failure to so qualify will not have a Material Adverse
Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Valid and Binding Obligations.</U> All Loan Documents, when duly executed and
delivered by the Borrower, will be the legal, valid, and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms except as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 32 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors&#146; rights generally or by equitable principles relative to enforceability.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Security Instruments.</U> The provisions of each Security Instrument are effective to
create in favor of the Agent, a legal, valid, and enforceable Lien in all right, title, and
interest of the Borrower in the Collateral described therein, except as enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors&#146; rights generally or by equitable principles relative to enforceability, which Liens,
assuming the accomplishment of recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully perfected first-priority Liens on
all right, title, and interest of the Borrower in the Collateral described therein subject to
Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Title to Assets.</U> The Borrower has good and indefeasible title to all of its
interests in its Properties then owned by it, free and clear of all Liens except Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>No Material Misstatements.</U> As of the Closing Date, no information, exhibit,
statement, or report furnished to the Lender by or at the direction of the Borrower in connection
with this Agreement contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading as of the date made or
deemed made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Liabilities, Litigation, and Restrictions.</U> As of the Closing Date, other than as
reflected and reported in Borrower&#146;s Financial Statements as of March&nbsp;31, 2006, including the due
to related parties, the Borrower has no liabilities, direct, or contingent, which would result in a
Material Adverse Effect, no litigation or other action of any nature affecting the Borrower is
pending before any Governmental Authority or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower which might reasonably be expected to result in any material
impairment of its ownership of any Collateral or have a Material Adverse Effect. To the best
knowledge of the Borrower, after due inquiry, no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Requirement of Law, or otherwise relative to the business
or operations of the Borrower or the ownership and operation of the Collateral would result in a
Material Adverse Effect, other than such as relate generally to Persons engaged in business
activities similar to those conducted by the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Authorizations; Consents.</U> Except as expressly contemplated by this Agreement, no
authorization, consent, approval, exemption, franchise, permit, or license of, or filing with, any
Governmental Authority or any other Person is required to authorize or is otherwise required in
connection with the valid execution and delivery by the Borrower of the Loan Documents or any
instrument contemplated hereby, the repayment by the Borrower of the Note and interest and fees
provided in the Note and this Agreement, or the performance by the Borrower of the Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <U>Compliance with Laws.</U> The Borrower and its Property, including, without
limitation, the Mortgaged Property, are in compliance with all material applicable Requirements of
Law, including, without limitation, Environmental Laws, the Natural Gas Policy Act of 1978,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 33 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">as amended, and ERISA, except to the extent non-compliance with any such Requirements of Law could
not reasonably be expected to have a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <U>ERISA.</U> No Reportable Event has occurred with respect to any Single Employer
Plan, and each Single Employer Plan has complied with and been administered in all material
respects in accordance with applicable provisions of ERISA and the Code. To the knowledge of the
Borrower, (a)&nbsp;no Reportable Event has occurred with respect to any Multiemployer Plan, and (b)&nbsp;each
Multiemployer Plan has complied with and been administered in all material respects with applicable
provisions of ERISA and the Code. The present value of all benefits vested under each Single
Employer Plan maintained by the Borrower or any Commonly Controlled Entity (based on the
assumptions used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed the value of the assets of such Plan allocable to such vested benefits. Neither
the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan for which there is any withdrawal liability. As of the most recent valuation
date applicable to any Multiemployer Plan, neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or such Commonly Controlled
Entity were to withdraw completely from such Multiemployer Plan. Neither the Borrower nor any
Commonly Controlled Entity has received notice that any Multiemployer Plan is Insolvent or in
Reorganization. To the knowledge of the Borrower, no such Insolvency or Reorganization is
reasonably likely to occur. Based upon GAAP existing as of the date of this Agreement and current
factual circumstances, the Borrower has no reason to believe that the annual cost during the term
of this Agreement to the Borrower and all Commonly Controlled Entities for post-retirement benefits
to be provided to the current and former employees of the Borrower and all Commonly Controlled
Entities under Plans which are welfare benefit plans (as defined in Section&nbsp;3(1) of ERISA) will, in
the aggregate, have a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11 <U>Environmental Laws.</U> To the knowledge and belief of the Borrower, except as
would not have a Material Adverse Effect:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) no Property of the Borrower is currently on or has ever been on, or is
adjacent to any Property which is on or has ever been on, any federal or state list of
Superfund Sites;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) no Hazardous Substances have been generated, transported, and/or disposed of
by the Borrower at a site which was, at the time of such generation, transportation,
and/or disposal, or has since become, a Superfund Site;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) except in accordance with applicable Requirements of Law or the terms of a
valid permit, license, certificate, or approval of the relevant Governmental
Authority, no Release of Hazardous Substances by the Borrower or from, affecting, or
related to any Property of the Borrower or adjacent to any Property of the Borrower has
occurred; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) no Environmental Complaint has been received by the Borrower.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 34 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12 <U>Compliance with Federal Reserve Regulations.</U> No transaction contemplated by the
Loan Documents is in violation of any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, T, U, or X.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13 <U>Investment Company Act Compliance.</U> The Borrower is not, nor is the Borrower
directly or indirectly controlled by or acting on behalf of any Person which is, an &#147;investment
company&#148; or an &#147;affiliated person&#148; of an &#147;investment company&#148; within the meaning of the Investment
Company Act of 1940, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14 <U>Public Utility Holding Company Act Compliance.</U> The Borrower is not a &#147;holding
company,&#148; or an &#147;affiliate&#148; of a &#147;holding company&#148; or of a &#147;subsidiary company&#148; of a &#147;holding
company,&#148; within the meaning of the Public Utility Holding Company Act of 1935, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15 <U>Proper Filing of Tax Returns; Payment of Taxes Due.</U> The Borrower has duly and
properly filed its United States income tax return and all other tax returns which are required to
be filed and has paid all taxes due except such as are being contested in good faith and as to
which adequate provisions and disclosures have been made. The respective charges and reserves on
the books of the Borrower with respect to taxes and other governmental charges are adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16 <U>Refunds.</U> No orders of, proceedings pending before, or other requirements of, the
Federal Energy Regulatory Commission, the Texas Railroad Commission, or any Governmental Authority
exist which could result in the Borrower being required to refund any material portion of the
proceeds received or to be received from the sale of hydrocarbons constituting part of the
Mortgaged Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17 <U>Gas Contracts.</U> The Borrower (a)&nbsp;is not obligated in any material respect by
virtue of any prepayment made under any contract containing a &#147;take-or-pay&#148; or &#147;prepayment&#148;
provision or under any similar agreement to deliver hydrocarbons produced from or allocated to any
of the Mortgaged Property at some future date without receiving full payment therefor within 90
days of delivery, and (b)&nbsp;has not produced gas, in any material amount, subject to, and neither the
Borrower nor any of the Mortgaged Properties is subject to, balancing rights of third parties or
subject to balancing duties under governmental requirements, except as to such matters for which
the Borrower has reflected in the most recent engineering report or established monetary reserves
adequate in amount to satisfy such obligations and has segregated such reserves from other
accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18 <U>Intellectual Property.</U> The Borrower owns or is licensed to use all Intellectual
Property necessary to conduct all business material to its financial condition, business, or
operations as such business is currently conducted. No claim has been asserted or is pending by any
Person with the respect to the use of any such Intellectual Property or challenging or questioning
the validity or effectiveness of any such Intellectual Property; and the Borrower knows of no valid
basis for any such claim. The use of such Intellectual Property by the Borrower does not infringe
on the rights of any Person, except for such claims and infringements as do not, in the aggregate,
give rise to any material liability on the part of the Borrower.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 35 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19 <U>Casualties or Taking of Property.</U> Except as would not result in a Material
Adverse Effect, neither the business nor any Property of the Borrower has been materially 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 Governmental Authority, riot, activities of armed forces,
or acts of God.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.20 <U>Locations of Borrower.</U> The principal place of business and chief executive office
of the Borrower is located at the address of the Borrower set forth in Section&nbsp;9.3 or at such other
location as the Borrower may have, by proper written notice hereunder, advised the Lender, provided
that such other location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.21 <U>Subsidiaries.</U> As of the Closing Date, the Borrower has no Subsidiaries.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE V</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>AFFIRMATIVE COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as any Obligation remains outstanding or unpaid or any Commitment exists, the
Borrower shall:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Maintenance and Access to Records.</U> Keep adequate records, of all its
transactions so that at any time, and from time to time, its true and complete financial condition
may be readily determined, and promptly following the reasonable request of the Agent, make such
records available for inspection by the Agent and, at the expense of the Borrower, allow the Agent
to make and take away copies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Quarterly Financial Statements: Compliance Certificates.</U> Deliver to the Agent,
(a)&nbsp;on or before the 45th day after the close of each of the first three quarterly periods of each
fiscal year of the Borrower and FWOE Partners L.P., beginning with the fiscal quarter ending June
30, 2006, a copy of its unaudited Financial Statements at the close of such quarterly period and
from the beginning of such fiscal year to the end of such period, such Financial Statements to be
certified by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP
(with the exception of footnotes) consistently applied and as a fair presentation of the condition
of the Borrower, subject to changes resulting from normal year-end audit adjustments, and (b)&nbsp;on or
before the 45th day after the close of each fiscal quarter, with the exception of the last fiscal
quarter, a Compliance Certificate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Ryder Scott Company Reserve Evaluation.</U> Deliver to the Agent a reserve
evaluation of Ryder Scott Company of each Project Field after each well therein has been completed
and tested and a Ryder Scott Company reserve evaluation after each well has been producing for one
month. Such reports shall be promptly furnished to the Agent upon the occurrence of such events
(i.e. the completion of each well and after such wells have been producing for one month).
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 36 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Status of Shareholder Loans.</U> Deliver to Agent monthly report, within 10&nbsp;days of
each month end, stating the amount of the shareholder loans at the end of each month.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <U>Log Sections, Maps and Test Dates.</U> Deliver to the Agent log sections, maps and
test data for each well after it has been completed and tested. The Borrower will promptly
deliver such information to the Agent after receiving such data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Annual Financial Statements.</U> Deliver to the Agent, on or before the 120th day
after the close of each fiscal year of the Borrower and FWOE Partners L.P., a copy of the Borrower
and FWOE Partners L.P. annual audited Financial Statements and the Borrowers Compliance Certificate
on the 120<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day after the close of each fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <U>Oil and Gas Reserve Reports,</U> (a)&nbsp;Deliver to the Agent no later than March 1 of
each year during the term of this Agreement, engineering reports in form and substance satisfactory
to the Agent, certified by Ryder Scott Company as fairly and accurately setting forth (i)&nbsp;the
proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately
classified as such) attributable to the Mortgaged Properties as of January 1 of the year for which
such reserve reports are furnished, (ii)&nbsp;the aggregate present value of the future net income with
respect to such Mortgaged Properties, discounted at a stated per annum discount rate of proven and
producing reserves, (iii)&nbsp;projections of the annual rate of production, gross income, and net
income with respect to such proven and producing reserves, and (iv)&nbsp;information with respect to the
&#147;take-or-pay,&#148; &#147;prepayment,&#148; and gas-balancing liabilities of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Deliver to the Agent no later than September 1 of each year during the term of this
Agreement, engineering reports in form and substance satisfactory to the Agent certified by Ryder
Scott Company evaluating the Mortgaged Properties as of July 1 of the year for which such reserve
reports are furnished and updating the information provided in the reports pursuant to Section
5.7(a).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Each of the reports provided pursuant to this Section shall be submitted to the Agent
together with additional data concerning pricing, quantities of production from the Mortgaged
Properties, volumes of production sold, purchasers of production, gross revenues, expenses, log
section, map, test data and such other information and engineering and geological data with respect
thereto as the Agent may reasonably request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 <U>Title Opinions; Title Defects and Mortgages.</U> Promptly upon the request of the
Agent, furnish to the Agent title opinions, in form and substance and by counsel satisfactory to
the Agent, or other confirmation of title acceptable to the Agent, covering all Oil and Gas
Properties currently in the Borrowing Base; and promptly, but in any event within 30&nbsp;days after
notice by the Agent of any defect, material in the opinion of the Agent in value, in the title of
the Borrower to any of its Oil and Gas Properties, clear such title defects, and, in the event any
such title defects are not cured in a timely manner, pay all related costs and fees incurred by the
Agent to do so. The Borrower shall at all times have granted a Mortgage to the Agent covering all
of the Oil and Gas Properties in the Borrowing Base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9 <U>Notices of Certain Events.</U> Deliver to the Agent, immediately upon having
knowledge of the occurrence of any of the following events or circumstances, a written statement
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">with respect thereto, signed by a Responsible Officer of the Borrower and setting forth the
relevant event or circumstance and the steps being taken by the Borrower with respect to such event
or circumstance:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any Default or Event of Default;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any default or event of default under any contractual obligation of the
Borrower, or any litigation, investigation, or proceeding between the Borrower
and any Governmental Authority which, in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a Material Adverse
Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any litigation or proceeding involving the Borrower as a defendant or in which
any Property of the Borrower is subject to a claim and in which the amount involved is
$100,000 or more and which is not covered by insurance or in which injunctive or
similar relief is sought;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the receipt by the Borrower of any Environmental Complaint;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) any actual, proposed, or threatened testing or other investigation by any
Governmental Authority or other Person concerning the environmental condition of, or
relating to, any Property of the Borrower or adjacent to any Property of the Borrower
following any allegation of a violation of any Requirement of Law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) any Release of Hazardous Substances by the Borrower or from, affecting, or
related to any Property of the Borrower or adjacent to any Property of the Borrower
except in accordance with applicable Requirements of Law or the terms of a valid
permit, license, certificate, or approval of the relevant Governmental Authority,
or the violation of any Environmental Law, or the revocation, suspension, or forfeiture
of or failure to renew, any permit, license, registration, approval, or authorization
which could reasonably be expected to have a Material Adverse Effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the change in identity or address of any Person remitting to the Borrower
proceeds from the sale of hydrocarbon production from or attributable to any Mortgaged
Property;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) any change in the senior management of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Reportable Event or imminently expected Reportable Event with respect
to any Plan; any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan; the institution of proceedings or the taking of any
other action by the PBGC, the Borrower or any Commonly Controlled Entity or
Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan; or
any Prohibited Transaction in connection with any Plan or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">any trust created thereunder and the action being taken by the Internal Revenue Service
with respect thereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) any other event or condition which could reasonably be expected to have
a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10 <U>Letters in Lieu of Transfer Orders; Division Orders.</U> Promptly upon request by
the Agent at any time and from time to time, execute such letters in lieu of transfer orders, in
addition to the letters signed by the Borrower and delivered to the Agent in satisfaction of the
condition set forth in Section&nbsp;3.1(f)(iii) and/or division and/or transfer orders as are necessary
or appropriate to transfer and deliver to the Agent proceeds from or attributable to any Mortgaged
Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11 <U>Additional Information.</U> Furnish to the Agent, promptly upon the request of the
Agent, such additional financial or other information concerning the assets, liabilities,
operations, and transactions of the Borrower as the Agent may from time to time request; and notify
the Lender not less than ten Business Days prior to the occurrence of any condition or event that
may change the proper location for the filing of any financing statement or other public notice or
recording for the purpose of perfecting a Lien in any Collateral, including, without limitation,
any change in its name or the location of its principal place of business or chief executive
office; and upon the request of the Agent, execute such additional Security Instruments as may be
necessary or appropriate in connection therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12 <U>Compliance with Laws.</U> Except to the extent the failure to comply or cause
compliance would not have a Material Adverse Effect, comply with all applicable Requirements of
Law, including, without limitation, (a)&nbsp;the Natural Gas Policy Act of 1978, as amended, (b)&nbsp;ERISA,
(c)&nbsp;Environmental Laws, and (d)&nbsp;all permits, licenses, registrations, approvals, and authorizations
(i)&nbsp;related to any natural or environmental resource or media located on, above, within, in the
vicinity of, related to or affected by any Property of the Borrower, (ii)&nbsp;required for the
performance of the operations of the Borrower, or (iii)&nbsp;applicable to the use, generation,
handling, storage, treatment, transport, or disposal of any Hazardous Substances; and cause all
employees, crew members, Lenders, contractors, subcontractors, and future lessees (pursuant to
appropriate lease provisions) of the Borrower, while such Persons are acting within the scope of
their relationship with the Borrower, to comply with all such Requirements of Law as may be
necessary or appropriate to enable the Borrower to so comply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13 <U>Payment of Assessments and Charges.</U> Pay all taxes, assessments, governmental
charges, rent, and other Indebtedness which, if unpaid, might become a Lien against the Property of
the Borrower, except any of the foregoing being contested in good faith and as to which adequate
reserve in accordance with GAAP has been established or unless failure to pay would not have a
Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14 <U>Maintenance of Limited Liability Company Existence and Good Standing. </U>Maintain
its limited liability company existence or qualification and good standing in its jurisdictions of
incorporation or formation and in all jurisdictions wherein the Property now owned or hereafter
acquired or business now or hereafter conducted necessitates same, unless the failure to do so
would not have a Material Adverse Effect.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 39 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15 <U>Payment of Notes; Performance of Obligations.</U> Pay the Notes according to the
reading, tenor, and effect thereof, as modified hereby, and do and perform every act and discharge
all of its other Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16 <U>Further Assurances.</U> Promptly cure any defects in the execution and delivery of
any of the Loan Documents and all agreements contemplated thereby, and execute,
acknowledge, and deliver such other assurances and instruments as shall, in the opinion of the
Lender, be necessary to fulfill the terms of the Loan Documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.17 <U>Initial Fees and Expenses of Counsel to Agent.</U> Upon request by the Agent,
promptly reimburse the Agent for all reasonable fees and expenses of Jackson Walker L.L.P., special
counsel to the Agent, in connection with the preparation of this Agreement and all documentation
contemplated hereby, the satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions contemplated in this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.18 <U>Subsequent Fees and Expenses of Agent.</U> Upon request by the Agent, promptly
reimburse the Agent (to the fullest extent permitted by law) for all amounts reasonably expended,
advanced, or incurred by or on behalf of the Agent to satisfy any obligation of the Borrower under
any of the Loan Documents; to collect the Obligations; to ratify, amend, restate, or prepare
additional Loan Documents, as the case may be; for the filing and recordation of Security
Instruments; to enforce the rights of the Agent under any of the Loan Documents; and to protect the
Properties or business of the Borrower, including, without limitation, the Collateral, which
amounts shall be deemed compensatory in nature and liquidated as to amount upon notice to the
Borrower by the Agent and which amounts shall include, but not be limited to (a)&nbsp;all court costs,
(b)&nbsp;reasonable attorneys&#146; fees, (c)&nbsp;reasonable fees and expenses of auditors and accountants
incurred to protect the interests of the Agent, (d)&nbsp;fees and expenses incurred in connection with
the participation by the Agent as a member of the creditors&#146; committee in a case commenced under
any Insolvency Proceeding, (e)&nbsp;fees and expenses incurred in connection with lifting the automatic
stay prescribed in &#167;362 Title 11 of the United States Code, and (f)&nbsp;fees and expenses incurred in
connection with any action pursuant to &#167;1129 Title 11 of the United States Code all reasonably
incurred by the Lender in connection with the collection of any sums due under the Loan Documents,
together with interest at the per annum interest rate equal to the Floating Rate, calculated on a
basis of a calendar year of 365 or 366&nbsp;days, as the case may be, counting the actual number of days
elapsed, on each such amount from the date of notification that the same was expended, advanced, or
incurred by the Agent until the date it is repaid to the Agent, with the obligations under this
Section surviving the non-assumption of this Agreement in a case commenced under any Insolvency
Proceeding and being binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator
of the Borrower appointed in any such case.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.19 <U>Operation of Oil and Gas Properties.</U> Develop, maintain, and operate its Oil and
Gas Properties in a prudent and workmanlike manner in accordance with industry standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.20 <U>Maintenance and Inspection of Properties.</U> Maintain all of its tangible Properties
in good repair and condition, ordinary wear and tear excepted; make all necessary replacements
thereof and operate such Properties in a good and workmanlike manner; and permit any
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">authorized representative of the Agent to visit and inspect, at the expense of the Borrower, any
tangible Property of the Borrower.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.21 <U>Maintenance of Insurance.</U> The Borrower shall maintain insurance with respect to
its Properties and businesses against such liabilities, casualties, risks, and contingencies as is
customary in the relevant industry and sufficient to prevent a Material Adverse Effect, all such
insurance to be in amounts (and with deductibles) and from insurers reasonably acceptable to the
Agent or as may be required under the laws of any state or jurisdiction in which it may be engaged
in business, maintained by Borrower, naming the Agent as loss payee, only as to coverage on
physical damage and only as it relates to Borrower&#146;s specific interest in such property and, as
additional insured (in the case of liability insurance) upon any renewal of any such insurance and
at other times upon request by the Agent, furnish to the Agent evidence, satisfactory to the Agent,
on the Closing Date of the maintenance of such insurance. The Borrower will give Agent 30&nbsp;days
prior written notice of intent to cancel or modify any such insurance. If no Borrowing Base
deficiency exists and no Event of Default has occurred and its continuing, (a)&nbsp;the Borrower will
cause all proceeds of insurance in connection with a Casualty Event to be deposited into a deposit
account at the Agent and (b)&nbsp;the Borrower may use such insurance proceeds to, at its option, repair
or rebuild the affected property or pay or prepay any outstanding Loans or other Obligations or for
any other lawful purpose not otherwise restricted by the Loan Documents. If a Borrowing Base
deficiency exists, such insurance proceeds shall be used to cure such Borrowing base deficiency by
prepaying the Loans and/or Letters of Credit to the extent of the deficiency. After the
occurrence and during the continuance of an Event of Default, the Agent may apply all insurance
proceeds upon receipt thereof to the Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.22
<U>INDEMNIFICATION.</U> INDEMNIFY AND HOLD THE AGENT AND EACH LENDER
AND ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, LENDERS, ATTORNEYS-IN-FACT, AND AFFILIATES
AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER AND EACH LENDER UNDER ANY SECURITY
INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES,
PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS,
REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS&#146; FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A)&nbsp;THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE BORROWER,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B)&nbsp;ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY
PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER
OR ANY PREDECESSOR IN TITLE, EMPLOYEE, LENDER, CONTRACTOR, OR SUBCONTRACTOR OF THE
BORROWER OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH
PROPERTY, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR
PRESENT ON OR UNDER SUCH PROPERTY, (C)&nbsp;ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF THE
BORROWER, (D)&nbsp;ANY CONTAMINATION OF ANY PROPERTY OR
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, LENDER,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL
BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E)&nbsp;THE PERFORMANCE AND
ENFORCEMENT OF ANY LOAN DOCUMENT OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE
FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE
AGENT AND EACH LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, LENDERS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY
INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.23 <U>Future Subsidiaries.</U> In the event Borrower acquires any Subsidiaries, it agrees
to have such Subsidiary become a Borrower under this Agreement or to guarantee the Obligation
hereunder whichever the Lender requires.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.24 <U>Hedging.</U> Within 5 Business Days following the effective date of this Agreement,
the Borrower agrees to enter into a Commodity Hedge Agreement(s) for 2,480,000 MMBtu of gas
production for the calendar year 2007, with a weighted average minimum price of $9.00 per MMBtu.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.25 <U>Flow Line Permit.</U> On or before 30&nbsp;days after obtaining the permit(s) from the
Governmental Authority required to construct, install and operate flow pipeline(s) originating in
the Project Fields, the Borrower agrees to execute and deliver to the Agent the Security
Instruments necessary to provide the Agent with a perfected first priority security interest in the
permit(s).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VI</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U> <B>NEGATIVE COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as any Obligation remains outstanding or unpaid or any Commitment exists, the
Borrower will not:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Indebtedness.</U> Create, incur, assume, or suffer to exist any Indebtedness, whether
by way of loan or otherwise; provided, however, the foregoing restriction shall not apply to (a)
the Obligations, (b)&nbsp;unsecured accounts payable in excess of $50,000 in the aggregate incurred in
the ordinary course of business, which are not unpaid in excess of 60&nbsp;days beyond invoice date or
are being contested in good faith and as to which such reserve as is required by GAAP has been
made or if there is an agreement between the trade creditor and the Borrower allowing a longer
time for payment, (c)&nbsp;crude oil, natural gas, or other hydrocarbon floor, collar, cap, price
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">protection, or swap agreements (&#147;Commodity Hedge Agreements&#148;), in form and substance and with a
Person acceptable to the Lender, provided that (i)&nbsp;each commitment issued under such agreement
must also be approved by the Lender, (ii)&nbsp;such agreements shall not be entered into with respect
to Mortgaged Properties constituting more than 80% of monthly production of proven developed
shut-in reserves as forecast in Lender&#146;s most recent engineering evaluation, (iii)&nbsp;that the strike
prices in such agreements are not less than the prices used by the Lender in its most recent
Borrowing Base determination, and (iv)&nbsp;the Lender shall receive a security interest in the
Commodity Hedge Agreements, (d)&nbsp;Rate Management Transactions, in form and substance and with a
Person acceptable to the Lender, (e)&nbsp;Indebtedness secured by Permitted Liens and (f)&nbsp;Subordinated
Debt.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Contingent Obligations.</U> Create, incur, assume, or suffer to exist any Contingent
Obligation; provided, however, the foregoing restriction shall not apply to (a)&nbsp;performance
guarantees and performance surety or other bonds provided in the ordinary course of business, or
(b)&nbsp;trade credit incurred or operating leases entered into in the ordinary course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Liens.</U> Create, incur, assume, or suffer to exist any Lien on any of its Oil and
Gas Properties or any other Property, whether now owned or hereafter acquired; provided, however,
the foregoing restrictions shall not apply to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Sales of Assets.</U> Without the prior written consent of the Agent, sell, transfer,
or otherwise dispose of, in one or any series of transactions assets in excess of $100,000 in the
aggregate, whether now owned or hereafter acquired, or enter into any agreement to do so;
<U>provided, however,</U> the foregoing restriction shall not apply to the sale of hydrocarbons or
inventory in the ordinary course of business or the sale or other disposition of Property
destroyed, lost, worn out, damaged or having only salvage value or no longer used or useful in the
business of the Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Leasebacks.</U> Enter into any agreement to sell or transfer any Property and
thereafter rent or lease as lessee such Property or other Property intended for the same use or
purpose as the Property sold or transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Loans or Advances.</U> Make or agree to make or allow to remain outstanding any loans
or advances to any Person; provided, however, the foregoing restrictions shall not apply to
(a)&nbsp;advances or extensions of credit in the form of accounts receivable incurred in the ordinary
course of business and upon terms common in the industry for such
accounts receivable, (b)&nbsp;advances to employees of the Borrower for the payment of expenses in the ordinary course of
business or (c)&nbsp;repayment of Subordinated Debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Investments.</U> Acquire Investments in, or purchase or otherwise acquire all or
substantially all of the assets of, any Person; provided, however, the foregoing restriction shall
not apply to the purchase or acquisition of (a)&nbsp;Oil and Gas Properties, (b)&nbsp;Investments in the form
of (i)&nbsp;debt securities issued or directly and fully guaranteed or insured by the United States
Government or any agency or instrumentality thereof, with maturities of no more than one year, (ii)
commercial paper of a domestic issuer rated at the date of acquisition at least P-2 by Moody&#146;s
Investor Service, Inc. or A-2 by Standard &#038; Poor&#146;s Corporation and with maturities of no more than
one year from the date of acquisition, or (iii)&nbsp;repurchase agreements covering debt
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">securities or commercial paper of the type permitted in this Section, certificates of deposit,
demand deposits, eurodollar time deposits, overnight bank deposits and bankers&#146; acceptances, with
maturities of no more than one year from the date of acquisition, issued by or acquired from or
through the Lender or any bank or trust company organized under the laws of the United States or
any state thereof and having capital surplus and undivided profits aggregating at least
$500,000,000, (c)&nbsp;other short-term Investments similar in nature and degree of risk to those
described in clause (b)&nbsp;of this Section, or (d)&nbsp;money-market funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Dividends and Distributions.</U> Declare, pay, or make, whether in cash or Property of
the Borrower, any dividend or distribution to any Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9
<U>Issuance of Stock; Changes in Limited Liability Structure.</U> Issue or agree to issue
additional shares of capital stock, in one or any series of transactions; enter into any
transaction of consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or suffer
any liquidation or dissolution).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10 <U>Transactions with Affiliates.</U> Directly or indirectly, enter into any
transaction (including the sale, lease, or exchange of Property or the rendering of service) with
any of its Affiliates, other than upon fair and reasonable terms no less favorable than could be
obtained in an arm&#146;s length transaction with a Person which was not an Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11 <U>Lines of Business.</U> Expand, on its own or through any Subsidiary, into any line of
business other than those in which the Borrower is engaged as of the date hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12 <U>ERISA Compliance.</U> Permit any Plan maintained by it or any Commonly Controlled
Entity to (a)&nbsp;engage in any Prohibited Transaction, (b)&nbsp;incur any &#147;accumulated funding deficiency,&#148;
as such term is defined in Section&nbsp;302 of ERISA, or (c)&nbsp;terminate in a manner which could result in
the imposition of a Lien on any Property of the Borrower pursuant to Section&nbsp;4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any Person or the assets
of any Person which has now or has had at any time an obligation to contribute to any Multiemployer
Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13 <U>FWOE Partners L.P.</U> Change, without the written consent of the Agent, any terms of
the Amended and Restated Agreement of Limited Partnership of FWOE Partners, L.P.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.14 <U>Interest Coverage Ratio.</U> Permit as of the close of any fiscal quarter, the ratio
of (a)&nbsp;EBITDAX to (b)&nbsp;Interest Expense, measured on a rolling four-quarter basis, to be less than
3.00 to 1.00 for the fiscal quarters ending June&nbsp;30, 2006 and September&nbsp;30, 2006 and 4.00 to 1.00
for the fiscal quarter ending December&nbsp;31,2006 and each fiscal quarter thereafter. Provided that
(i)&nbsp;for the purpose of calculating the Interest Coverage Ratio as of the fiscal quarter ending June
30, 2006, the ratio shall be calculated by multiplying both EBITDAX and Interest Expense computed
for the fiscal quarter ending June&nbsp;30, 2006 by 4, and (ii)&nbsp;for the purposes of calculating the
Interest Coverage Ratio as of the fiscal quarter ending September&nbsp;30, 2006, the ratio shall be
calculated by adding the EBITDAX and Interest Expense computed for the fiscal quarter ending June
30, 2006 with the EBITDAX and Interest Expense computed for the fiscal quarter ending September&nbsp;30,
2006, respectively, and multiplying each sum by 2, and (iii)&nbsp;for the purposes of calculating the
Interest Coverage Ratio as of the fiscal quarter ending December&nbsp;31, 2006, the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ratio shall be calculated be adding the EBITDAX and Interest Expense computed for the fiscal
quarter ending June&nbsp;30, 2006 with the EBITDAX and Interest Expense computed for the fiscal quarter
ending September&nbsp;30, 2006 with the EBITDAX and Interest Expense computed for the fiscal quarter
ending December&nbsp;31, 2006, respectively, and multiplying each sum by 4/3; provided further that any
EBITDAX and Interest Expense computation for subsequent fiscal quarters shall be computed on a
rolling four-quarter basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.15 <U>Tangible Net Worth.</U> Permit Tangible Net Worth, as of the close of any fiscal
quarter beginning June&nbsp;30, 2006, to be less than 90% of the Tangible Net Worth at March&nbsp;31, 2006,
plus 75% of positive quarterly net income thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.16 <U>General and Administrative Expenses.</U> Permit, as of the close of any fiscal
quarter, general and administrative expenses to be more than $350,000 per quarter beginning with
the period ending June&nbsp;30, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.17 <U>Minimum Liquidity.</U> Permit, subsequent to Project Completion as defined in the
Completion and Liquidity Maintenance Agreement, the sum of the Available Commitment plus
unrestricted cash plus cash equivalent to be less than $1,000,000 at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.18 <U>Put Right Agreement.</U> Change, without the written consent of the Agent, which
consent will not be unreasonably withheld, any terms of the Put Right Agreement between the
Borrower and PrimeEnergy Corporation.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VII</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>EVENTS OF DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Enumeration of Events of Default.</U> Any of the following events shall
constitute an Event of Default:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) default shall be made in the payment when due on any installment of principal
or interest under this Agreement or the Notes or in the payment when due on any fee or
other sum payable under any Loan Document and such default as to interest or fees only
shall have continued for three Business Days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) default shall be made by the Borrower in the due observance or performance of
any of their respective obligations under the Loan Documents, and such default shall
continue for 30&nbsp;days after the earlier of notice thereof to the Borrower by the Agent
or knowledge thereof by the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any representation or warranty made by the Borrower in any of the Loan
Documents proves to have been untrue in any material respect or any representation,
statement (including Financial Statements), certificate, or data furnished or made to
the Agent in connection herewith proves to have been untrue in any material respect as
of the date the facts therein set forth were stated or certified;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 45 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) default shall be made by the Borrower (as principal or guarantor or other surety) in the
payment or performance of any bond, debenture, note, or other Indebtedness or under any
credit agreement, loan agreement, indenture, promissory note, or similar agreement or
instrument executed in connection with any of the foregoing, and such default shall remain
unremedied for in excess of the period of grace, if any, with respect thereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Borrower shall be unable to satisfy any condition or cure any circumstance specified
in Article&nbsp;III, the satisfaction or curing of which is precedent to the right of the Borrower to
obtain a Loan or the issuance of a Letter of Credit and such inability shall continue for a period
in excess of 30&nbsp;days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) either the Borrower shall (i)&nbsp;apply for or consent to the appointment of a
receiver, trustee, or liquidator of it or all or a substantial part of its assets, (ii)&nbsp;file a
voluntary petition commencing an Insolvency Proceeding, (iii)&nbsp;make a general assignment for the
benefit of creditors, (iv)&nbsp;be unable, or admit in writing its inability, to pay its debts generally
as they become due, or (v)&nbsp;file an answer admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) an order, judgment, or decree shall be entered against either the Borrower by any court of
competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking
reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator,
custodian, or liquidator of it or all or any substantial part of its assets, and such order,
judgment, or decree shall not be dismissed or stayed within 60&nbsp;days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the levy against any significant portion of the Property of the Borrower, or any
execution, garnishment, attachment, sequestration, or other writ or similar proceeding which is
not permanently dismissed or discharged within 30&nbsp;days after the levy;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a final and non-appealable order, judgment, or decree shall be entered against the
Borrower for money damages and/or Indebtedness due in an amount in excess of $500,000, and such
order, judgment, or decree shall not be paid in full, dismissed, or stayed within 60&nbsp;days;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) any charges are filed or any other action or proceeding is instituted by any Governmental
Authority against either the Borrower under the Racketeering Influence and Corrupt Organizations
Statute (18 U.S.C. &#167;1961 <u>et seq</u>.), the result of which could be the forfeiture or transfer of any
material Property of the Borrower subject to a Lien in favor of the Lender and/or the Lenders
without (i)&nbsp;satisfaction or provision for satisfaction of such Lien, or (ii)&nbsp;such forfeiture or
transfer of such Property being expressly made subject to such Lien;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 46 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Borrower shall have (i)&nbsp;concealed, removed, or diverted, or permitted
to be concealed, removed, or diverted, any part of its Property, with intent to
hinder, delay, or defraud its creditors or any of them, (ii)&nbsp;made or suffered a
transfer of any of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance, or similar law, (iii)&nbsp;made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly situated have
not been paid, or (iv)&nbsp;shall have suffered or permitted, while insolvent, any
creditor to obtain a Lien upon any of its Property through legal proceedings or
distraint which is not vacated within 30&nbsp;days from the date thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) any Security Instrument shall for any reason not, or cease to, create valid
and perfected first-priority Liens against the Collateral purportedly covered
thereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) the Borrower shall cease to be owned by its presently existing
shareholders;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) the occurrence of a Material Adverse Effect and the same shall remain
unremedied for in excess of 60&nbsp;days after notice given by the Lender; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) breach of the obligations under the Completion and Liquidity Maintenance
Agreement of even date herewith, by and between PrimeEnergy Corporation, Borrower
and Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Remedies.</U> (a)&nbsp;Upon the occurrence of an Event of Default specified in Sections
7.1(f) or 7.1(g), immediately and without notice, (i)&nbsp;all Obligations shall automatically become
immediately due and payable, without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein, all of which are
hereby expressly waived by the Borrower; (ii)&nbsp;the Commitment shall immediately cease and terminate
unless and until reinstated by the Lender in writing; and (iii)&nbsp;the Lender are hereby authorized at
any time and from time to time, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set-off and apply any and all deposits (general or special, time or
demand, provisional or final) held by the Lender and any and all other indebtedness at any time
owing by the Lender to or for the credit or account of the Borrower against any and all of the
Obligations although such Obligations may be unmatured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Upon the occurrence of any Event of Default other than those specified in Sections&nbsp;7.1(f)
or 7.1(g), (i)&nbsp;the Lender may, by notice to the Borrower, declare all Obligations immediately due
and payable, without presentment, demand, protest, notice of protest, default, or dishonor, notice
of intent to accelerate maturity, notice of acceleration of maturity, or other notice of any kind,
except as may be provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower; (ii)&nbsp;the Commitment shall immediately cease and terminate unless and until
reinstated by the Lender in writing; and (iii)&nbsp;the Lender are hereby authorized at any time and
from time to time, without notice to the Borrower (any such notice being expressly waived by the
Borrower), to set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Lender and any and all other
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --> - 47 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">indebtedness at any time owing by the Lender to or for the credit or account of the Borrower
against any and all of the Obligations although such Obligations may be unmatured.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Upon the occurrence of any Event of Default, the Lender may, in addition to the foregoing
in this Section, exercise any or all of its rights and remedies provided by law or pursuant to the
Loan Documents.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE VIII</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>THE AGENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 <U>Appointment.</U> Each Lender hereby designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Loan Documents. Each Lender authorizes the
Agent, as the agent for such Lender, to take such action on behalf of such Lender under the
provisions of this Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities except those expressly set forth
herein or in any other Loan Document or any fiduciary relationship with any Lender; and no implied
covenants, functions, responsibilities, duties, obligations, or liabilities on the part of the
Agent shall be read into this Agreement or any other Loan Document or otherwise exist against the
Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Waivers, Amendments.</U> The provisions of this Agreement and of each other Loan
Document may from time to time be amended, modified or waived, if such amendment, modification, or
waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however,
that no such amendment, modification or waiver would: (a)&nbsp;modify any requirement hereunder that any
particular action be taken by all of the Lenders or by the Required Lenders unless consented to by
each Lender; (b)&nbsp;modify this Section&nbsp;8.2, change the definition of &#147;Required Lenders&#148;, or change
the Commitment Amount or Percentage Share of any Lender, reduce the fees described in Article&nbsp;II,
extend the Commitment Termination Date or Final Maturity, release any Security Instrument or Lien,
or initiate any foreclosure, enforcement or collection procedure without the consent of each
Lender; (c)&nbsp;extend the due date for, (or reduce the amount of any scheduled repayment or prepayment
of principal of or interest on any Loan) without the consent of the holder of that Note evidencing
such Loan; (d)&nbsp;affect, adversely the interests, rights, or obligations of the Agent without the
consent of the Agent; or (e)&nbsp;to modify the Borrowing Base or modify the monthly amount by which the
Borrowing Base shall be reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Delegation of Duties.</U> The Agent may execute any of its duties under this
Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall
not be responsible to any Lender for the negligence or misconduct of any agents or attorneys-in-
fact selected by it with reasonable care.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --> - 48 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Exculpatory Provisions.</U> Neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (a)&nbsp;required to initiate or conduct any
litigation or collection proceedings hereunder, except with the concurrence of the Required Lenders
and contribution by each Lender of its Percentage Share of costs reasonably expected by the Agent
to be incurred in connection therewith, (b)&nbsp;liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any other Loan Document
(except for gross negligence or willful misconduct of the Agent or such Person), or (c)&nbsp;responsible
in any manner to any Lender for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document or for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or records of the
Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Reliance by Agent.</U> The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless and
until a written notice of assignment, negotiation, or transfer thereof shall have been received by
the Agent. The Agent shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and contribution by each Lender of its Percentage
Share of costs reasonably expected by the Agent to be incurred in connection therewith. The Agent
shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required Lenders. Such request
and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all
future holders of the Notes. In no event shall the Agent be required to take any action that
exposes the Agent to personal liability or that is contrary to any Loan Document or applicable
Requirement of Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>Notice of Default.</U> The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default unless the Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a &#147;notice of default.&#148; In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably directed by the
Required Lenders; <U>provided</U> that unless and until the Agent shall have received such
directions, subject to the provisions of <u>Section&nbsp;7.2</u>, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders. In the event that the
officer of the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agent primarily responsible for the lending relationship with the Borrower or the officer of any
Lender primarily responsible for the lending relationship with the Borrower becomes aware that a
Default or Event of Default has occurred and is continuing, the Agent or such Lender, as the case
may be, shall use its good faith efforts to inform the other Lenders and/or the Agent, as the case
may be, promptly of such occurrence. Notwithstanding the preceding sentence, failure to comply
with the preceding sentence shall not result in any liability to the Agent or any Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <U>Non-Reliance on Agent and Other Lenders.</U> Each Lender expressly acknowledges that
neither the Agent nor any other Lender nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representation or warranty to such Lender and
that no act by the Agent or any other Lender hereafter taken, including any review of the affairs
of the Borrower, shall be deemed to constitute any representation or warranty by the Agent or any
Lender to any other Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into the business,
operations, property, condition (financial and otherwise) and creditworthiness of the Borrower and
the value of the Collateral and other Properties of the Borrower and has made its own decision to
enter into this Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrower and the value of the
Collateral and other Properties of the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other information concerning
the business, operations, property, condition (financial and otherwise), or creditworthiness of the
Borrower or the value of the Collateral or other Properties of the Borrower which may come into the
possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 <U>Indemnification.</U> <B>Each Lender agrees to indemnify the Agent and its officers,
directors, employees, agents, attorneys-in-fact and affiliates (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so), ratably according to the
Percentage Share of such Lender, from and against any and all liabilities, claims, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including any time following the payment and performance of
all obligations and the termination of this Agreement) be imposed on, incurred by or asserted
against the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates in any way relating to or arising out of this Agreement or any other Loan Document, or
any other document contemplated or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates under or in connection with any of the foregoing, including any
liabilities, claims, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements imposed, incurred or asserted as a result of the negligence, whether
sole or concurrent, of the Agent or any of its officers, directors, employees, agents,
attorneys-in-</B>
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>fact or affiliates; provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. The agreements
in this Section shall survive the payment and performance of all obligations and the termination
of this Agreement.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 <U>Restitution.</U> Should the right of the Agent or any Lender to realize funds with
respect to the Obligations be challenged and any application of such funds to the Obligations be
reversed, whether by Governmental Authority or otherwise, or should the Borrower otherwise be
entitled to a refund or return of funds distributed to the Lenders in connection with the
Obligations, the Agent or such Lender, as the case may be, shall promptly notify the Lenders of
such fact. Not later than Noon, Central Standard or Central Daylight Savings Time, as the case may
be, of the Business Day following such notice, each Lender shall pay to the Agent an amount equal
to the ratable share of such Lender of the funds required to be returned to the Borrower. The
ratable share of each Lender shall be determined on the basis of the percentage of the payment all
or a portion of which is required to be refunded originally distributed to such Lender, if such
percentage can be determined, or, if such percentage cannot be determined, on the basis of the
Percentage Share of such Lender. The Agent shall forward such funds to the Borrower or to the
Lender required to return such funds. If any such amount due to the Agent is made available by any
Lender after Noon, Central Standard or Central Daylight Savings Time, as the case may be, of the
Business Day following such notice, such Lender shall pay to the Agent (or the Lender required to
return funds to the Borrower, as the case may be) for its own account interest on such amount at a
rate equal to the Federal Funds Rate for the period from and including the date on which
restitution to the Borrower is made by the Agent (or the Lender required to return funds to the
Borrower, as the case may be) to but not including the date on which such Lender failing to timely
forward its share of funds required to be returned to the Borrower shall have made its ratable
share of such funds available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 <U>Agent in Its Individual Capacity.</U> The Agent and its affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the Borrower as though the
Agent were not the agent hereunder. With respect to any Note issued to the Lender serving as the
Agent, the Agent shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms &#147;Lender&#148; and &#147;Lenders&#148;
shall include the Agent in its individual capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 <U>Successor Agent.</U> The Agent may resign as Agent upon ten days&#146; notice to the
Lenders and the Borrower. If the Agent shall resign as Agent under this Agreement and the other
Loan Documents, Lenders for which the Percentage Shares aggregate at least fifty-one percent (51%)
shall appoint from among the Lenders a successor agent for the Lenders, subject to the reasonable
consent of the Borrower, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent. The term &#147;Agent&#148; shall mean such successor agent effective upon its
appointment. The rights, powers, and duties of the former Agent as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of any Agent
hereunder as Agent, the provisions of this <U>Article&nbsp;VIII</U> and those of any Section hereof
relating to the Agent, including <U>Section&nbsp;5.17, Section&nbsp;5.18</U> and <U>Section&nbsp;5.22</U> shall
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 <U>Applicable Parties.</U> The provisions of this Article are solely for the benefit of
the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary
or otherwise under any of the provisions of this Article. In performing functions and duties
hereunder and under the other Loan Documents, the Agent shall act solely as the agent of the
Lenders and does not assume, nor shall it be deemed to have assumed, any obligation or relationship
of trust or agency with or for the Borrower or any legal representative, successor, and assign of
the Borrower.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>ARTICLE IX</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Transfers; Participations.</U> Each Lender may assign or sell participations
in its Loans and Commitments to one or more other Persons in accordance with this Section&nbsp;9.1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Assignments.</U> Any Lender,
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) with the written consent of the Borrower and the Agent
(which consent shall not be unreasonably delayed or withheld), may
at any time, assign and delegate to one or more commercial banks or
other financial institutions, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) with notice to the Borrower and the Agent, but without the
consent of the Borrower or the Agent, may assign and delegate to any
of its Affiliates or to any other Lender
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(each Person described in (i)&nbsp;or (ii)&nbsp;above as being the Person to whom such assignment and
delegation is to be made, being hereinafter referred to as an &#147;Assignee Lender&#148;), all or any
fraction of such Lender&#146;s total Loans and Commitments (which assignment and delegation shall be of
a constant, and not a varying percentage, of all the assigning Lender&#146;s Loans and Commitments), in
a minimum aggregate amount of $1,000,000 of such Lender&#146;s Percentage Share of the Maximum
Commitment Amount, if less; provided, however, that such Assignee Lender will comply with all the
provisions of this Agreement, and further, provided, however, that the Borrower and Agent shall be
entitled to continue to deal solely and directly with such assigning Lender in connection with the
interests so assigned and delegated to an Assignee Lender until:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) written notice of such assignment and delegation together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the
Borrower and the Agent by such Lender and such Assignee Lender,
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 52 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) such Assignee Lender shall have executed and delivered to
the Borrower and the Agent a Lender Assignment Agreement, accepted
by the Borrower and the Agent and attached hereto as Exhibit&nbsp;VII,
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the processing fees described below shall have been paid.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From and after the date that the Borrower and the Agent accept such Lender Assignment Agreement,
(a)&nbsp;the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and
to the extent that rights and obligations hereunder have been assigned and delegated to such
Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (b)&nbsp;the Assignor Lender,
to the extent that rights and obligations hereunder have been assigned and delegated by it in
connection with such Lender Assignment Agreement, shall be released from its obligations hereunder
and under the other Loan Documents. Within five Business Days after its receipt of notice that the
Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver
to the Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee
Lender&#146;s assigned Loans and Commitments and, if the assignor Lender has retained Loans and
Commitments hereunder, replacement Notes in the principal amount of the Loans and Commitments
retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment
of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the
predecessor Notes. The assignor Lender shall mark the predecessor Notes &#147;exchanged&#148; and deliver
them to the Borrower. Accrued interest on that part of the predecessor Notes evidenced by the new
Notes, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to
the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times
provided in the predecessor Notes and in this Agreement. Such assignor Lender or such assignee
Lender must also pay a processing fee to the Agent upon delivery of any Lender Assignment
Agreement in the amount of $3,000. Any attempted assignment and delegation not made in accordance
with this Section&nbsp;9.1 shall be null and void.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Participations.</U> Any Lender, with the prior written consent of the Borrower in its
sole discretion, may at any time sell to one or more commercial banks (each of such commercial
banks being herein called a &#147;<u>Participant</u>&#148;) participating interests in any of the Loans,
Commitments, or other interests of such Lender hereunder; provided, however, that (a)&nbsp;no
participation contemplated in this Section&nbsp;9.1 shall relieve such Lender from its Commitments or
its other obligations hereunder or under any other Loan Document, (b)&nbsp;such Lender shall remain
solely responsible for the performance of its Commitments and such other obligations, (c)&nbsp;the
Borrower and the Agent shall continue to deal solely and directly with such Lender in connection
with such Lender&#146;s rights and obligations under this Agreement and each of the other Loan
Documents, (d)&nbsp;no Participant shall be entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan Document.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Survival of Representations, Warranties, and Covenants.</U> All representations
and warranties of the Borrower and all covenants and agreements herein made shall survive the
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --> - 53 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">execution and delivery of the Notes and the Security Instruments and shall remain in force and
effect so long as any Obligation is outstanding or any Commitment exists.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Notices and Other Communications.</U> Except as to oral notices expressly
authorized herein, which oral notices shall be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly
provided herein, any such notice, request, demand, or other communication shall be deemed to have
been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited
in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy
notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed as
follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if to the Agent and Lender, to:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 8%; margin-top: 6pt">Guaranty Bank, FSB<BR>
333 Clay Street, Suite&nbsp;4400<BR>
Houston, Texas 77002<BR>
Attention: David M. Butler<BR>
Telecopy: (713) 890-8868
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if to the Borrower, to:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 8%; margin-top: 6pt">Prime Offshore L.L.C.<BR>
9821 Katy Freeway,<BR>
Suite&nbsp;1050<BR>
Houston, Texas 77024<BR>
Attention: Jim R. Brock<BR>
Telecopy: (713) 461-9231
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any party may, by proper written notice hereunder to the others, change the individuals or
addresses to which such notices to it shall thereafter be sent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Parties in Interest.</U> Subject to applicable restrictions contained herein, all
covenants and agreements herein contained by or on behalf of the Borrower, the Agent or the Lenders
shall be binding upon and inure to the benefit of the Borrower, the Agent or the Lenders, as the
case may be, and their respective legal representatives, successors, and assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Rights of Third Parties.</U> All provisions herein are imposed solely and exclusively
for the benefit of the Agent, Lenders and the Borrower. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing to require
satisfaction of provisions hereof in accordance with their terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6
<U>Renewals; Extensions.</U> All provisions of this Agreement relating to the Notes
shall apply with equal force and effect to each promissory note hereafter executed which in whole
or in part represents a renewal or extension of any part of the Indebtedness of the Borrower under
this Agreement, the Notes, or any other Loan Document.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 54 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7
<U>No Waiver; Rights Cumulative.</U> No course of dealing on the part of the Agent or a
Lender, its officers or employees, nor any failure or delay by the Agent or a Lender with respect
to exercising any of its rights under any Loan Document shall operate as a waiver thereof. The
rights of the Agent or a Lender under the Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other right. Neither the
making of any Loan nor the issuance of a Letter of Credit shall constitute a waiver of any of the
covenants, warranties, or conditions of the Borrower contained herein. In the event the Borrower
is unable to satisfy any such covenant, warranty, or condition, neither the making of any Loan nor
the issuance of a Letter of Credit shall have the effect of precluding the Lender from thereafter
declaring such inability to be an Event of Default as hereinabove provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Survival Upon Unenforceability.</U> In the event any one or more of the provisions
contained in any of the Loan Documents or in any other instrument referred to herein or executed in
connection with the Obligations shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to herein or executed in
connection with such Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments; Waivers.</U> Neither this Agreement nor any provision hereof may be
amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver, discharge, or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U>Controlling Agreement.</U> In the event of a conflict between the provisions of this
Agreement and those of any other Loan Document, the provisions of this Agreement shall control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U>Disposition of Collateral.</U> Notwithstanding any term or provision, express or
implied, in any of the Security Instruments, the realization, liquidation, foreclosure, or any
other disposition on or of any or all of the Collateral shall be in the order and manner and
determined in the sole discretion of the Agent; provided, however, that in no event shall the Agent
violate applicable law or exercise rights and remedies other than those provided in such Security
Instruments or otherwise existing at law or in equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U>USA Patriot Act Notice.</U> Lender hereby notices Borrower that pursuant to the
requirements of the USA Patriot Act (Title 111 of Pub. L. 107-56 (signed into law October&nbsp;26,
2001)) (the &#147;<u>Act</u>&#148;) it is required to obtain, verify and record information that identifies
Borrower, which information includes the names and address of Borrower and other information that
will allow Lender to identify Borrower in accordance with the Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE CONTRACTS MADE
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT
CHAPTER 345 OF THE TEXAS </B><b>FINANCE</b> <B>CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 55 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.14 <b>JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY
OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES
ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.15<B> WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, AGENT AND THE LENDERS HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR
OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.16<B> ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.17 <U>Counterparts.</U> For the convenience of the parties, this Agreement may be
executed in multiple counterparts, each of which for all purposes shall be deemed to be an
original, and all such counterparts shall together constitute but one and the same Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> - 56 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement is deemed executed effective as of the date first above
written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>BORROWER:</B></U> <BR>
<BR>
<BR>
<B>PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jim R. Brock
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --> - 57 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>AGENT AND LENDER:</B></U><BR>
<BR>
<B>GUARANTY BANK, FSB</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Kelly L. Elmore, III
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Kelly L. Elmore, III&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Senior Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --> - 58 - <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>PROMISSORY NOTE</B></U>

</DIV>




<DIV align="CENTER" style="font-size: 10pt; margin-top: 6pt">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="34%" ALIGN="LEFT">$200,000,000&nbsp;</TD>
    <TD width="33%" ALIGN="CENTER">Houston, Texas &nbsp;</TD>
    <TD width="33%" ALIGN="RIGHT">June&nbsp;29, 2006&nbsp;</TD>
</TR>
</TABLE>





</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>GUARANTY BANK, FSB</B> (&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas, the sum
of TWO HUNDRED MILLION DOLLARS ($200,000,000), or so much thereof as may be advanced against this
Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee
(as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together with
interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, availability of the Maker to receive advances under this Note and certain
events which will entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the meanings assigned to
such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to and is payable as provided in the Credit Agreement. Subject
to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the
full amount or any part of this Note without the payment of any premium or fee, but such payment
shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of
any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security
Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jim R. Brock       &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->I-i<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I(A)</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF NOTE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>PROMISSORY NOTE</B></U>

</DIV>







<DIV align="CENTER" style="font-size: 10pt; margin-top: 6pt">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="34%" ALIGN="LEFT">$5,000,000&nbsp;</TD>
    <TD width="33%" ALIGN="CENTER">Houston, Texas &nbsp;</TD>
    <TD width="33%" ALIGN="RIGHT">June&nbsp;29, 2006&nbsp;</TD>
</TR>
</TABLE>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (&#147;<U>Maker</U>&#148;) promises to pay to the order
of <B>GUARANTY BANK, FSB </B>(&#147;<U>Payee</U>&#148;), at its banking quarters in Houston, Harris County, Texas, ON
DEMAND the sum of FIVE MILLION DOLLARS ($5,000,000), or so much thereof as may be advanced against
this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and
Payee (as amended, restated, or supplemented from time to time, the &#147;<U>Credit Agreement</U>&#148;), together
with interest at the rates and calculated as provided in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Credit Agreement for matters governed thereby, including,
without limitation, availability of the Maker to receive advances under this Note and certain
events which will entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the meanings assigned to
such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Note is issued pursuant to and is payable as provided in the Credit Agreement. Subject
to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the
full amount or any part of this Note without the payment of any premium or fee, but such payment
shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of
any payment on this Note provided for in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Without being limited thereto or thereby, this Note is secured by the Security Instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.</B>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --> I(A)-i <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT II </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF BORROWING REQUEST&#093;</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GUARANTY BANK, FSB <BR>333 CLAY
STREET, SUITE 4400 <BR>HOUSTON, TEXAS
77002 <BR>Attention: David M. Butler

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Re:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated as of June&nbsp;29, 2006, by and between PRIME
OFFSHORE L.L.C. and GUARANTY BANK, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the &#147;<U>Credit Agreement</U>&#148;)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Credit Agreement, the Borrower hereby makes the requests indicated below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Loans</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount of new Loan: $ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Requested funding date: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 20<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of such Loan is to be a Floating Rate Loan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of such Loan is to be a LIBO Rate Loan.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Requested Interest Period for LIBO Rate Loan: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>months.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Continuation or conversion of LIBO Rate Loan maturing on <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be continued as a LIBO Rate Loan is $ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, with an Interest</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Period of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> months;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be converted to a Floating Rate Loan is $ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> ; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Conversion of Floating Rate Loan:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Requested conversion date: <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 20 <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> .</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount to be converted to a LIBO Rate Loan is $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> , with an Interest
Period of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> months.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned certifies that he is the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of the Borrower, has obtained all consents
necessary, and as such she/he is authorized to execute this request 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, continuation, or conversion under the
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --> II-i <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">terms and conditions of the Credit Agreement and are in full compliance with all the terms and
conditions of the Credit Agreement. Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-ii <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT III </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF COMPLIANCE CERTIFICATE&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> <B>, 2004</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GUARANTY BANK, FSB <BR>333 CLAY
STREET, SUITE 4400 <BR>HOUSTON, TEXAS
77002 <BR>Attention: David M. Butler

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Re:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Credit Agreement dated as of June&nbsp;29, 2006, by and between PRIME
OFFSHORE L.L.C. and Guaranty Bank, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the &#147;<U>Credit Agreement</U>&#148;)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to applicable requirements of the Credit Agreement, the undersigned, as a
Responsible Officer of the Borrower, hereby certifies to you the following information as true and
correct as of the date hereof or for the period indicated, as the case may be:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">1. To the best of the knowledge of the undersigned, no Default or Event of Default exists
as of the date hereof or has occurred since the date of our previous certification to you,
if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">1. To the best of the knowledge of the undersigned, the following Defaults or Events of
Default exist as of the date hereof or have occurred since the date of our previous
certification to you, if any, and the actions set forth below are being taken to remedy such
circumstances:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">2. The compliance of the Borrower with the financial covenants of the Credit Agreement, as
of the close of business on&#95;&#95;&#95;&#95;&#95; , is evidenced by the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.14: <U>Interest Coverage Ratio.</U> Permit as of
the close of any fiscal quarter, the ratio of (a)&nbsp;EBITDAX to (b)
Interest Expense, measured on a rolling four-quarter basis, to be less
than 3.00 to 1.00 for the fiscal quarters ending June&nbsp;30, 2006 and
September&nbsp;30, 2006 and 4.00 to 1.00 for the fiscal quarter ending
December&nbsp;31, 2006 and each fiscal quarter thereafter.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>Actual </U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to 1.0

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.15: <U>Tangible Net Worth.</U> Permit Tangible Net
Worth, as adjusted for exploration costs as of the close of any fiscal
quarter beginning June&nbsp;30, 2006, to be less than 90% of the Tangible Net</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> III-i <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Worth at March&nbsp;31, 2006, plus 75% of positive quarterly net income
thereafter.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>Required</U> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Actual</U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.16: <U>General and Administrative Expenses.</U> Permit, as of the
close of any fiscal quarter, general and administrative expenses to be more
than $350,000 per quarter beginning with the period ending June&nbsp;30, 2006.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>Actual</U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;6.17: <U>Minimum Liquidity.</U> Permit, subsequent to Project
Completion as defined in the Completion and Liquidity Maintenance Agreement,
the sum of the Available Commitment plus unrestricted cash plus cash
equivalent to be less than $1,000,000 at any time.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>Required</U> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Actual</U>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. No Material Adverse Effect has occurred since the date of the Financial Statements
dated as of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> .
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> III-ii <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each capitalized term used but not defined herein shall have the meaning assigned to such term
in the Credit Agreement.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours,<BR>
<BR>
<B>PRIME OFFSHORE L.L.C.</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;&nbsp;&nbsp;President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio --> III-iii <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT IV </B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF OPINION OF COUNSEL&#093;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">
<B>&#091;Closing Date&#093;</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GUARANTY BANK, FSB <BR>333 CLAY STREET,
SUITE 4400<BR>
HOUSTON, TEXAS 77002<BR>
Attention: David M. Butler

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Credit Agreement dated as of June&nbsp;29, 2006, by and between PRIME
OFFSHORE L.L.C. and Guaranty Bank, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the &#147;<u>Credit Agreement</u>&#148;)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have
acted as counsel to PRIME OFFSHORE L.L.C. (the &#147;<u>Borrower</u>&#148;) in connection with the
transactions contemplated in the Credit Agreement. This Opinion is delivered pursuant to Section
3.1(m) of the Credit Agreement, and the Lender is hereby authorized to rely upon this Opinion in
connection with the transactions contemplated in the Credit Agreement. Each capitalized term used
but not defined herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our representation of the Borrower, we have examined an executed counterpart of each of the
following (the &#147;Loan Documents&#148;):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Credit Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Notes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement dated of even date herewith
from the Borrower in favor of the Lender (the &#147;Mortgage&#148;); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Financing Statements from the Borrower, as debtors, constituent to
the Mortgage (the &#147;Financing Statement&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) a certificate of incumbency dated the Closing Date, including
specimen signatures of all officers or other representatives of the Borrower who
are authorized to execute Loan Documents on behalf of the Borrower, such
certificate being executed by the manager or another authorized representative of
the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) copies of resolutions, to the extent required under the Operating
Agreement of the Borrower, adopted by the board of directors of the Borrower
approving the Loan Documents to which the Borrower is a party and authorizing
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">IV-i
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the transactions contemplated herein and therein, accompanied by a certificate dated
the Closing Date issued by the manager or another authorized representative of the
Borrower to the effect that such copies are true and correct copies of resolutions
duly adopted and that such resolutions constitute all the resolutions adopted with
respect to such transactions, have not been amended, modified, or rescinded in any
respect, and are in full force and effect as of the date of such certificate;
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) multiple counterparts, as requested by the Lender, of the following
Security Instruments creating, evidencing, perfecting, and otherwise establishing
Liens in favor of the Lender in and to the Collateral:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Ratification of Mortgage and Deed of Trust, Indenture,
Security Agreement, Assignment of Production, and Financing Statement
from the Borrower covering all Oil and Gas Properties of the Borrower
and all improvements, personal property, and fixtures related
thereto;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (i)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) undated letters, in form and substance satisfactory to
the Lender, from the Borrower to each purchaser of production and
disburser of the proceeds of production from or attributable to the
Mortgaged Properties, together with additional letters with the
addressees left blank, authorizing and directing the addressees to
make future payments attributable to production from the Mortgaged
Properties directly to the Lender;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Security Agreement from the Borrower pledging contract
rights, etc.;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Financing Statements from the Borrower, as debtor,
constituent to the instrument described in clause (iv)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Pledge Agreement from the Borrower pledging certain
partnership interest;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Financing Statement from the Borrower, as debtor,
constituent to the instrument described in Clause (vi)&nbsp;above;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) certificates dated as of a recent date from the Secretary of State or other
appropriate Governmental Authority evidencing the existence or qualification and
good standing of the Borrower in its jurisdictions of formation and in any other
jurisdictions where it does business;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also examined the originals, or copies certified to our satisfaction, of such other
records of the Borrower, certificates of public officials and officers of the Borrower, agreements,

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">IV-ii
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">instruments, and documents as we have deemed necessary as a basis for the opinions hereinafter
expressed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In making such examinations, we have, with your permission, assumed:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the genuineness of all signatures to the Loan Documents other than those
of the Borrower;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the authenticity of all documents submitted to us as originals and the
conformity with the originals of all documents submitted to us as copies;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Agent and Lender is authorized and has the power to enter into and
perform its obligations under the Credit Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the due authorization, execution, and delivery of all Loan Documents by
each party thereto other than the Borrower; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Borrower has title to all Property covered or affected by the Mortgage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the foregoing and subject to the qualifications set forth herein, we are of the
opinion that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Borrower is a limited liability company duly organized, legally
existing, and in good standing under the laws of their respective states of formation
and is
duly qualified as a limited liability company and is in good standing in all
jurisdictions
wherein the ownership of their respective Property or the operation of its respective
businesses necessitates same.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The execution and delivery by the Borrower of the Credit Agreement and
the borrowings thereunder, the execution and delivery by the Borrower of the other Loan
Documents to which the Borrower is a party, and the payment and performance of all
Obligations of the Borrower thereunder are within the power of the Borrower, have been
duly authorized by all necessary corporate action, and do not (a)&nbsp;require the consent
of any Governmental Authority, (b)&nbsp;contravene or conflict with any Requirement of Law,
(c)to our knowledge after due inquiry, contravene or conflict with any indenture,
instrument, or other agreement to which the Borrower is a party or by which any
Property of the Borrower may be presently bound or encumbered, or (d)&nbsp;result in or require the
creation or imposition of any Lien upon any Property of the Borrower other than as
contemplated by the Loan Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Loan Documents to which the Borrower is a party constitute legal,
valid, and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The forms of the Mortgage and the Financing Statement and the
description of the Mortgaged Property (as such term is defined in the Mortgage and so
used herein) situated in the State of Texas (the &#147;State&#148;) satisfy all
applicable
Requirements of Law of the State and are legally sufficient under the laws of the State
to
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">IV-iii
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">enable the Lender to realize the practical benefits purported to be afforded by the Mortgage.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Mortgage creates a valid lien upon and security interest in all
Mortgaged Property situated in the State to secure the Indebtedness (as such term is
defined in the Mortgage and so used herein).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The Mortgage and the Financing Statement are in satisfactory form for
filing and recording in the offices described below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. The filing and/or recording, as the case may be, of (a)&nbsp;the Mortgage in the
office of the county clerk of each county in the State in which any portion of the
Mortgaged Property is located, and as a financing statement and utility security
instrument in the office of the Secretary of State of the State, and (b)&nbsp;the Financing
Statement in the Uniform Commercial Code records in each county in the State in which
any portion of the Mortgaged Property is located are the only recordings or filings in the
State necessary to perfect the liens and security interests in the Mortgaged Property
created by the Mortgage or to permit the Lender to enforce in the State its rights under
the Mortgage. No subsequent filing, re-filing, recording, or re-recording will be required
in the State in order to continue the perfection of the liens and security interests created
by the Mortgage except that (a)&nbsp;a continuation statement must be filed with respect to the
Mortgage filed as a financing statement in the office of the Secretary of State of the State
and with respect to the Financing Statement in the Uniform Commercial Code records in
each county in the State in which any portion of the Mortgaged Property is located, each
within six months prior to the expiration of five years from the date of the relevant initial
financing statement filing, (b)&nbsp;a subsequent continuation statement must be filed within
six months prior to the expiration of each subsequent five-year period from the date of
each initial financing statement filing, and (c)&nbsp;amendments or supplements to the
Mortgage filed as a financing statement and the Financing Statement and/or additional
financing statements may be required to be filed in the event of a change in the name,
identity, or structure of the Borrower or in the event the financing statement filing
otherwise becomes inaccurate or incomplete.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. To our knowledge after due inquiry, except as disclosed in Exhibit&nbsp;VI to
the Credit Agreement, no litigation or other action of any nature affecting the Borrower is
pending before any Governmental Authority or threatened against the Borrower. To our
knowledge after due inquiry, no unusual or unduly burdensome restriction, restraint, or
hazard exists by contract, Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the ownership and operation of any Properties of the
Borrower other than such as relate generally to Persons engaged in business activities
similar to those conducted by the Borrower, as the case may be.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. No authorization, consent, approval, exemption, franchise, permit or
license of, or filing (other than filing of Security Instruments in appropriate filing
offices)
with, any Governmental Authority or any other Person is required to authorize or is
otherwise required in connection with the valid execution and delivery by the Borrower
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">IV-iv
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of the Loan Documents or any instrument contemplated thereby, or the payment performance by
the Borrower of the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. No transaction contemplated by the Loan Documents is in violation of any
regulations promulgated by the Board of Governors of the Federal Reserve System,
including, without limitation, Regulations G, T, U, or X.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. The Borrower is not, nor is the Borrower directly or indirectly controlled
by or acting on behalf of any Person which is, an &#147;investment company&#148; or an
&#147;affiliated
person&#148; of an &#147;investment company&#148; within the meaning of the Investment Company Act
of 1940, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. The Borrower is not a &#147;holding company,&#148; or an &#147;affiliate&#148; of a &#147;holding
company&#148; or of a &#147;subsidiary company&#148; of a &#147;holding company,&#148; within the meaning of
the Public Utility Holding Company Act of 1935, as amended.</div>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The opinions expressed herein are subject to the following qualifications and limitations:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. We are licensed to practice law only in the State and other jurisdictions
whose laws are not applicable to the opinions expressed herein; accordingly, the
foregoing opinions are limited solely to the laws of the State, applicable United
States
federal law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The validity, binding effect, and enforceability of the Loan Documents
may be limited or affected by bankruptcy, insolvency, moratorium,
reorganization, or other
similar laws affecting rights of creditors generally, including, without
limitation,
statutes or rules of law which limit the effect of waivers of rights by a debtor or
grantor;
provided, however, that the limitations and other effects of such statutes or rules of
law
upon the validity and binding effect of the Loan Documents should not differ materially
from the limitations and other effects of such statutes or rules of law upon the
validity
and binding effect of credit agreements, promissory notes, guaranties, and security
instruments generally.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. The enforceability of the respective obligations of the Borrower under the
Loan Documents is subject to general principles of equity (whether such enforceability
is
considered in a suit in equity or at law).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Opinion is furnished by us solely for the benefit of the Lender in connection with the
transactions contemplated by the Loan Documents and is not to be quoted in whole or in part or
otherwise referred to or disclosed in any other transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">Very truly yours,

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">IV-v
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT V</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><U>FACILITY AMOUNTS</U></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Revolving Line of Credit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name of Lender</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Facility Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Percentage Share</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guaranty Bank, FSB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">200,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">200,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

 <DIV align="center" style="font-size: 10pt; margin-top: 18pt">V-i
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>EXHIBIT VI </B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;FORM OF ASSIGNMENT AGREEMENT&#093;</B><BR><BR>
<U><B>ASSIGNMENT AGREEMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This ASSIGNMENT AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time, this &#147;<U>Agreement</U>&#148;) is dated as of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, by and
between
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;<U>Assignor</U>&#148;) and <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;<U>Assignee</U>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>RECITALS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Assignor is a party to the Credit Agreement dated as of June&nbsp;29, 2006,
(as amended, supplemented or restated from time to time, the &#147;<U>Credit Agreement</U>&#148;) by and
among PRIME OFFSHORE L.L.C. (the &#147;<U>Borrower</U>&#148;), each of the lenders that is or becomes a party
thereto as provided in Section&nbsp;9.1(b) of the Credit Agreement (individually, together with its
successors and assigns, a &#147;<U>Lender</U>&#148;, and collectively, together with their successors and assigns,
the &#147;<U>Lenders</U>&#148;), and Guaranty Bank, FSB, a federal savings bank, as a Lender (in such capacity,
&#147;Guaranty&#148;) and as agent for the Lenders (in such capacity, together with its successors in such
capacity, the &#147;<U>Agent</U>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee
proposes to purchase and assume from the Assignor, <B>&#091;all&#093;&nbsp;&#091;a portion&#093; </B>of the Assignor&#146;s Facility
Amount and its outstanding Loans, all on the terms and conditions of this Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Definitions from Credit Agreement</U>. All capitalized terms used but not
defined
herein have the respective meanings given to such terms in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <u> Additional Defined Terms</U>. As used herein, the following terms have the
following respective meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Assigned Interest</U>&#148; shall mean all of Assignor&#146;s (in its capacity as a
&#147;Lender&#148;) rights and obligations (i)&nbsp;under the Credit Agreement and the other Loan
Documents in respect of <B>&#091;all of&#093; &#091;the portion of the&#093; </B>Facility Amount of the Assignor in
the principal
amount equal to <BR>$
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and (ii)&nbsp;to make Loans under its Commitment up to such
amount referenced above and any right to receive payments for the Loans currently
outstanding under its Commitment in the principal amount of $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;<u>Loan
Balance</u>&#148;), plus the interest and fees which will accrue with respect thereto from and after
the Assignment Date.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-i
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Assignment
Date</u>&#148; shall
mean&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3
<U>References</U>. References in this Agreement to Schedule, Exhibit, Article, or
Section numbers shall be to Schedules, Exhibits, Articles, or Sections of this Agreement,
unless
expressly stated to the contrary. References in this Agreement to &#147;hereby,&#148; &#147;herein,&#148;
&#147;hereinafter,&#148; &#147;hereinabove,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder&#148; and words of similar import
shall be to this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article,
or Section in which such reference appears. Except as otherwise indicated, references in
this
Agreement to statutes, sections, or regulations are to be construed as including all statutory
or
regulatory provisions consolidating, amending, replacing, succeeding, or supplementing the
statute, section, or regulation referred to. References in this Agreement to &#147;writing&#148;
include
printing, typing, lithography, facsimile reproduction, and other means of reproducing words in
a tangible visible form. References in this Agreement to agreements and other contractual
instruments shall be deemed to include all exhibits and appendices attached thereto and all
subsequent amendments and other modifications to such instruments, but only to the extent such
amendments and other modifications are not prohibited by the terms of this Agreement.
References in this Agreement to Persons include their respective successors and permitted
assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of
the
parties hereto shall be determined from this instrument as an entirety and without regard to
the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Number and Gender</U>. Whenever the context requires, reference herein made to
the single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural
shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated.
Words denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall
be
construed as cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <U>Negotiated Transaction</U>. Each party to this Agreement affirms to the other that it
has had the opportunity to consult, and discuss the provisions of this Agreement with,
independent counsel and fully understands the legal effect of each provision.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>SALE AND ASSIGNMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Sale and Assignment.</U> On the terms and conditions set forth herein,
effective on and as of the Assignment Date, the Assignor hereby sells, assigns and transfers to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the right, title
and interest of the Assignor in and to, and all of the obligations of the Assignor in respect of,
the Assigned Interest. Such sale, assignment and transfer is without recourse and, except as
expressly provided in this Agreement, without representation or warranty.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-ii
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Assumption of Obligations</U>. The Assignee agrees with the Assignor (for the
express benefit of the Assignor and the Borrower) that the Assignee will, from and after the
Assignment Date, assume and perform all of the obligations of the Assignor in respect of the
Assigned Interest. From and after the Assignment Date: (a)&nbsp;the Assignor shall be released from
the Assignor&#146;s obligations in respect of the Assigned Interest, and (b)&nbsp;the Assignee shall be
entitled to all of the Assignor&#146;s rights, powers and privileges under the Credit Agreement and
the
other Loan Documents in respect of the Assigned Interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Consent by Agent</U>. By executing this Agreement as provided
below,
in accordance with Section&nbsp;9.1(b) of the Credit Agreement, the Agent hereby acknowledges
notice of the transactions contemplated by this Agreement and consents to such transactions.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE III</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><U><B>PAYMENTS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Payments.</U> As consideration for the sale, assignment and transfer contemplated
by <U>Section&nbsp;2.1,</U> the Assignee shall, on the Assignment Date, assume Assignor&#146;s obligations
in respect of the Assigned Interest and pay to the Assignor an amount equal to the Loan Balance,
if any, all accrued and unpaid interest and fees with respect to the Assigned Interest as of the
Assignment Date. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Allocation of Payments</U>. The Assignor and the Assignee agree that
(i)&nbsp;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)&nbsp;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)&nbsp;the Agent is authorized and instructed
to
allocate payments received by it for the 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Delivery of Notes</U>. Promptly following the receipt by the Assignor of
the consideration required to be paid under <U>Section&nbsp;3.1</U> hereof, the Assignor shall, in
the manner contemplated by Section&nbsp;9.1(b) of the Credit Agreement, (i)&nbsp;deliver to the Agent (or
its counsel) the Note held by the Assignor and (ii)&nbsp;notify the Agent to request that the Borrower
execute and deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the
Assignee, dated the Assignment Date in respective principal amounts equal to the respective
Facility Amounts of the Assignor (if appropriate) and the Assignee after giving effect to the
sale, assignment and transfer contemplated hereby.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-iii
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <U>Further Assurances</U>. The Assignor and the Assignee hereby agree to execute
and deliver such other instruments, and take such other actions, as either party may reasonably
request in connection with the transactions contemplated by this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>CONDITIONS PRECEDENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness of the sale, assignment and transfer contemplated hereby is subject
to the satisfaction of each of the following conditions precedent:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the execution and delivery of this Agreement by the Assignor and
the Assignee;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the receipt by the Assignor of the payments required to be made
under <U>Section&nbsp;3.1;</U> and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the acknowledgment and consent by the Agent contemplated by
<U>Section&nbsp;2.3.</U>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE V</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Representations and Warranties of Assignor</U>. The Assignor represents and
warrants to the Assignee as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its obligations
under, and consummate the transactions contemplated by, this Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the execution, delivery and compliance with the terms hereof by
the Assignor and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Requirement of Law applicable to it;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against it in accordance with its terms;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all approvals and authorizations of, all filings with and all actions
by any Governmental Authority necessary for the validity or enforceability of its
obligations under this Agreement have been obtained;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Assignor has good title to, and is the sole legal and beneficial
owner of, the Assigned Interest, free and clear of all Liens, claims,
participations
or other charges of any nature whatsoever; and
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-iv
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the transactions contemplated by this Agreement are commercial banking
transactions entered into in the ordinary course of the banking business of the
Assignor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Disclaimer</U>. Except as expressly provided in <U>Section&nbsp;5.1</U> hereof, 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 Credit Agreement or in any other Loan Document or for the value, validity,
effectiveness, genuineness, execution, legality, enforceability or sufficiency of the Credit
Agreement, the Notes or any other Loan Document or for any failure by the Borrower or any
other Person (other than Assignor) 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 other Person, or any other matter relating to the Credit
Agreement or any other Loan Document or any extension of credit thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <u> Representations and Warranties of Assignee</U>. The Assignee represents and
warrants to the Assignor as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its obligations
under, and consummate the transactions contemplated by, this Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the execution, delivery and compliance with the terms hereof by
the Assignee and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Requirement of Law applicable to it;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee, enforceable
against it in accordance with its terms;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;all approvals and authorizations of, all filings with and all actions
by any Governmental Authority necessary for the validity or enforceability of its
obligations under this Agreement have been obtained;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;the Assignee has received copies of the Credit Agreement and the
other Loan Documents, as well as copies of all Financial Statements previously
provided by the Borrower in satisfaction of obligations under the Credit
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;the Assignee has fully reviewed the terms of the Credit Agreement
and the other Loan Documents and has independently and without reliance upon
the Assignor, and based on such information as the Assignee has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;if the Assignee is not incorporated under the laws of the United
Sates of America or a state thereof, the Assignee has contemporaneously herewith
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-v
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">delivered to the Agent and the Borrower such documents as are required by Section
2.25(b) of the Credit Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the transactions contemplated by this Agreement are commercial banking
transactions entered into in the ordinary course of the banking business of the
Assignee.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Notices</U>. All notices and other communications provided for herein
(including
any modifications of, or waivers, requests or consents under, this Agreement) shall be given
or
made in writing (including by telecopy) to the intended recipient at its &#147;Address for Notices&#148;
specified below its name on the signature pages hereof or, as to either party, at such other
address as shall be designated by such party in a notice to the other party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Amendment, Modification or Waiver</U>. No provision of this Agreement may be
amended, modified or waived except by an instrument in writing signed by the Assignor and the
Assignee, and consented to by the Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Successors and Assigns</U>. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted assigns. The
representations and warranties made herein by the Assignee are also made for the benefit of
the
Agent, and the Assignee agrees that the Agent is entitled to rely upon such representations
and
warranties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Assignments</U>. Neither party hereto may assign any of its rights or obligations
hereunder except in accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>Counterparts</U>. This Agreement may be executed in any number of counterparts,
each of which shall be identical and all of which, taken together, shall constitute one and
the same instrument, and each of the parties hereto may execute this Agreement by signing any such
counterpart.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <u>Governing Law</U>. This Agreement (including the validity and enforceability
hereof) shall be governed by, and construed in accordance with, the laws of the State of
Texas,
other than the conflict of laws rules thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Expenses</U>. To the extent not paid by the Borrower pursuant to the terms of the
Credit Agreement, each party hereto shall bear its own expenses in connection with the
execution, delivery and performance of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Waiver of Jury Trial</U>. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, any and all right to trial by jury in any legal proceeding
arising out
of or relating to this Agreement or the transactions contemplated hereby.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;SIGNATURES APPEAR ON THE FOLLOWING PAGE&#093;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-Vi
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed
and delivered as of the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><U>ASSIGNOR</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp; &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><U>Address for Notices:</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Telecopier No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Telephone No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><U>ASSIGNEE</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><U>Address for Notices:</U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Telecopier No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Telephone No.:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Attention:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left">ACKNOWLEDGED AND CONSENTED TO:</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left">GUARANTY BANK, FSB <BR>as Agent</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Name:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">VI-vii
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26.1
<SEQUENCE>14
<FILENAME>d44173exv10w26w1.htm
<DESCRIPTION>SUBORDINATION AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w26w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 18pt">EXHIBIT 10.26.1
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>SUBORDINATION AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS
SUBORDINATION AGREEMENT </B>(this &#147;<u>Agreement</u>&#148;) is made and entered into effective this
29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day
of June, 2006, by and among <B>PRIME OFFSHORE L.L.C. </B>(the
&#147;<u>Borrower</u>&#148;). <B>PRIMEENERGY
CORPORATION </B>(the &#147;<u>Subordinated Party</u>&#148;) and
<B>GUARANTY BANK, FSB, </B>a federal savings bank (the
&#147;<u>Agent</u>&#148;
and a &#147;<u>Lender</u>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><u>W</u> <u>I</u> <u>T</u> <u>N</u> <u>E</u> <u>S</u> <u>S</u> <u>E</u> <u>T</u> <u>H</u>:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to that certain Credit Agreement dated June&nbsp;29, 2006, by and between the
Borrower and the Agent and Lender (as such agreement may be amended, modified, supplemented or
restated from time to time, the &#147;<u>Credit Agreement</u>&#148;), the Lender has agreed to make Loans to or for
the benefit of the Borrower;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Subordinated Party (&#147;<u>SP</u>&#148;) has advanced certain funds to the Borrower pursuant to a
Credit Agreement effective August&nbsp;22, 2005 between Borrower and SP, with a Convertible Note in the
amount of $40,000,000 and has advanced approximately $32,000,000 as of the date of this Agreement
and may advance other funds to the Borrower subsequent to the date of this Agreement (all of which
are referred to as the &#147;<u>Debt</u>&#148;):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Lender to extend credit
to the Borrower under the Credit Agreement, SP and the Borrower have agreed to execute this
Agreement in favor of the Lender;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the
parties hereto agree as follows:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE I</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DEFINITIONS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01
<U>Terms Defined Above</U>. As used in this Agreement, each of the terms
&#147;<u>Agreement</u>,&#148; &#147;<u>Borrower</u>,&#148;
&#147;<u>Credit Agreement</u>,&#148; &#147;Debt,&#148;
&#147;<u>Lender</u>,&#148; and &#147;<u>SP</u>,&#148; shall have the
meaning assigned to such term hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02
<U>Terms Defined in Credit Agreement</U>. Each term defined in the Credit Agreement
and used herein without definition shall have the meaning assigned to such term in the Credit
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03 <u>Other Definitional Provisions</u>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinafter,&#148; &#147;hereinabove,&#148; &#147;hereinbelow,&#148;
&#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular Article, Section or provision of
this Agreement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Section references are to such Sections of this Agreement unless
otherwise
specified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) As used herein and in any certificate or other document made or delivered
pursuant hereto, accounting and financial terms not otherwise defined shall be defined
according to GAAP.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE II</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SUBORDINATION</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01 <U>Subordination of Payment.</U> The payment of the Debt is hereby expressly
subordinated in right of payment to the prior payment in full of all Obligations and all other
indebtedness of the Borrower owed to the Lender; <U>provided,</U> <U>however,</U> so long as
no Default or
Event of Default has occurred and is continuing for which the Lender has given written notice
of
such Default or Event of Default to the Borrower (a &#147;<u>Default
Notice</u>&#148;), and the payment of
interest and/or principal will not result in a Default or an Event of Default, the Borrower
may pay
interest and/or principal on the Debt. At any time following the occurrence and during the
continuance of any Default or Event of Default and provided that the Lender has given a
Default
Notice, SP will not request, accept or receive, and the Borrower will not make, any payments,
whether in cash or other Property, on or with respect to the Debt unless and until (a)&nbsp;such
Default
or Event of Default shall have been cured or waived or shall have ceased to exist, or (b)&nbsp;such
time as all Obligations shall have been fully paid and performed and the obligation of the
Lender
to make Loans under the Credit Agreement shall have terminated. Notwithstanding the above, if
within one hundred eighty (180)&nbsp;days after the giving of such Default Notice by the Lender
such
Default or Event of Default has not become the subject of (a)&nbsp;judicial proceedings or (b)&nbsp;an
acceleration notice by the Lender, then the Borrower may, at its option (unless in such
interval
the provision of this Section&nbsp;2.01 have again come into effect on account of any other Default
or
Event of Default), resume making any and all required payments in respect of the Debt in any
manner authorized under the terms governing such Debt until such time (if any) that such
judicial proceedings are instituted, such an acceleration notice is given or a Default Notice
is
given and a period of one hundred eighty (180)&nbsp;days shall not have elapsed since the giving of
such Default Notice as contemplated above. If any direct or indirect payment or
distribution,
whether in cash or other Property, shall be received by SP in contravention of the provisions
hereof, such payment or distribution shall be held in trust for, and shall be immediately paid
over or delivered to, the Lender for application to the Obligations until all Obligations shall
have been
paid in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02 <u>SP Debt Subordinated to Prior Payment of Obligations on Dissolution</u>,
<U>Liquidation or Reorganization of the Borrower.</U> Upon any distribution of assets of the
Borrower
upon any voluntary or involuntary dissolution, winding up, liquidation or reorganization of
the
Borrower (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment
for the benefit of creditors or otherwise):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Lender shall first be entitled to receive payment in full (or to have such
payment duly provided for to its satisfaction) of the principal thereof and interest due on
the Obligations and other amounts due in connection therewith before SP is entitled to
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">receive any payment on account of the principal of or interest on the Debt and SP
agrees not to contest any proceeding which allows such payment to the Lender in full even
if SP does not receive the full payment of the Debt;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any payment or distribution of assets of the Borrower of any kind or
character, whether in cash, property or securities, to which SP would be entitled
except
for the provisions of this Agreement, shall be paid by the liquidating trustee or agent
or
other person making such payment or distribution directly to the Lender or its
representative, to the extent necessary to make payment in full of all Obligations
remaining unpaid, after giving effect to any concurrent payment or distribution or
provision therefor to the Lender; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if, notwithstanding the foregoing, any payment or distribution of assets of
the Borrower of any kind or character, whether in cash, property or securities, shall
be
received by SP on account of principal of or interest on the Debt before all
Obligations
are paid in full or provision made for their payment, such payment or distribution
(subject
to the further provisions of this Article) shall be immediately paid over to the Lender
or
its representative for application to the payment of all Obligations remaining unpaid
or
unprovided for until all such Obligations shall have been paid in full, after giving
effect
to any concurrent payment or distribution or provision therefor to the Lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.03
<U>Subordination of Remedies</U>. So long as any Obligation remains outstanding or any
obligation of the Lender exists to make Loans under the Credit Agreement, SP shall not, without the
prior written consent of the Lender, declare any Debt due or in default or foreclose upon or
exercise any power of sale with respect to any security for all or any portion of the Debt or
exercise any other right, power or remedy of SP provided for in any document or instrument executed
in connection with the Debt or by law, individually or with any other creditor of the Borrower
initiate or take any action in any bankruptcy, insolvency or receivership proceedings of the
Borrower or seek an assignment for the benefit of creditors or the marshalling of the assets and
liabilities of the Borrower. Upon any distribution of assets of the Borrower or the dissolution,
winding up, liquidation or reorganization (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or the marshalling of the assets and
liabilities of the Borrower or otherwise), any payment to which SP would otherwise be entitled with
respect to the Debt shall be held in trust for, and shall be immediately paid over or delivered to,
the Lender for application to the Obligations until all Obligations shall have been paid in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.04 <U>Continuing Agreement.</U> This Agreement shall continue in full force and effect and
the liabilities and obligations of the Borrower and SP hereunder shall not be affected or impaired
by any amendment, modification or alteration of any Loan Document, except as may be expressly
provided in any such amendment, modification or alteration. This Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Lender upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been
made.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.05 <U>Liability Not Impaired.</U> The liabilities and obligations of the
Borrower and SP hereunder shall not be affected or impaired by (a)&nbsp;the failure of the Lender or any
other Person to exercise diligence or reasonable care in the preservation, protection or other
handling or treatment of all or any part of any Collateral for all or any portion of the
Obligations, (b)&nbsp;the failure of any Lien intended to be granted or created to secure all or any
part of the Obligations to be properly perfected or created or the unenforceability of any such
Lien for any other reason, or (c)&nbsp;the subordination of any such Lien to any other Lien. The Lender
may at any time and from time to time, without the consent of or notice to SP, and without
incurring any responsibility to SP, and without impairing or releasing or otherwise affecting any
of the obligations or agreements of SP hereunder, (a)&nbsp;change the manner, place or terms of payment,
or change or extend the time of payment of, renew, or alter all or any portion of the Obligations,
(b)&nbsp;exchange, release, surrender, realize upon or otherwise deal with, in any manner and any order,
any Property at any time subject to any Lien in favor of the Lender, (c)&nbsp;exercise or refrain from
exercising any rights against the Borrower or others, and (d)&nbsp;sell, transfer, assign or grant
participations in the Obligations or any portion thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.06 <U>Waivers.</U> SP waives any right to require the Lender to (a)&nbsp;proceed against the
Borrower or make any effort at the collection of the Obligations from the Borrower or any other
Person liable for all or any portion of the Obligations, (b)&nbsp;proceed against or exhaust any
Collateral securing all or any portion of the Obligations, or (c)&nbsp;pursue any other remedy in the
power of the Lender. The liability and obligations of SP hereunder shall not be affected or
impaired by any action or inaction by the Lender in regard to any matter waived herein.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE III</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>MISCELLANEOUS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01 <U>Survival of Covenants and Agreements.</U> All covenants and agreements of the
Borrower and SP herein made shall survive the execution and delivery hereof and shall remain in
force and effect so long as any Obligation remains outstanding or any obligation of the Lender
exists to make Loans under the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02
<U>Parties in Interest</U>. All covenants and agreements herein contained by or on behalf
of the Borrower, SP or the Lender shall be binding upon and inure to the benefit of the Borrower,
SP, or the Lender, as the case may be, and their respective legal representatives, successors and
assigns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03 <U>Rights of Third Parties</U>. All provisions herein are imposed solely and exclusively
for the benefit of the Borrower, SP, and the Lender. No other Person shall have any right,
benefit, priority or interest hereunder or as a result hereof or have standing to require
satisfaction of provisions hereof in accordance with their terms; and any or all of such provisions
may be freely waived in whole or in part by the Lender at any time if in its sole discretion it
deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.04
<U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood and agreed that the rights and other legal
relations of the parties hereto shall be determined from this Agreement as an entirety and without
regard
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to the aforesaid division into Articles and Sections and without regard to headings
prefixed to such Articles or Sections.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.05 <U>Number and Gender.</U> Whenever the context requires, reference herein made to the
single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms defined in the singular or plural shall be
equally applicable to the plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the general but shall be
construed as cumulative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.06
<U>No Waiver; Rights Cumulative.</U> No course of dealing on the part of the Lender, its
officers or employees, nor any failure or delay by the Lender with respect to exercising any of its
rights hereunder or under any Loan Document shall operate as a waiver of any of the rights of the
Lender hereunder or under such Loan Document. The rights of the Lender hereunder and under the
Loan Documents shall be cumulative, and the exercise or partial exercise of any such right shall
not preclude the exercise of any other right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.07 <U>Survival Upon Unenforceability.</U> If any one or more of the provisions contained
herein or executed in connection herewith shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof or of any such other instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.08 <U>Amendments or Modifications.</U> Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.09 <U><B>GOVERNING LAW.</B></U><B> THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.10 <U><B>JURISDICTION AND VENUE.</B></U> <B>ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING
DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
AGREEMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING
SITUS IN DALLAS, DALLAS COUNTY, TEXAS. EACH OF THE BORROWER AND SP HEREBY SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN DALLAS, DALLAS COUNTY, TEXAS, AND
HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE</B> <B>OF ANY
LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.11 <U><B>ENTIRE AGREEMENT.</B></U><B> THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT AMONG
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE</B>
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SUBJECT HEREOF. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG SUCH PARTIES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>this Agreement is deemed executed effective as of the date first above
written and may be executed in multiple counterparts, each deemed to be an original.
</DIV>

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<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B><U>BORROWER:</U><BR>
<BR>
<BR>
PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jim R. Brock
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B><U>LENDER:</U> <BR>
<BR>
<BR>
GUARANTY BANK, FSB , AS AGENT</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Kelly L. Elmore, III
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Kelly L. Elmore, III&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Senior Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><U><B>SUBORDINATED PARTY</B></U><B>:<BR>
<BR>
PRIMEENERGY CORPORATION</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/        Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President,<br>
Treasurer and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>15
<FILENAME>d44173exv10w27.htm
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w27</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 18pt">EXHIBIT 10.27
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITY AGREEMENT</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BETWEEN</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRIME OFFSHORE L.L.C.<BR>
(DEBTOR)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AND</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GUARANTY BANK, FSB, AS AGENT<BR>
(SECURED PARTY)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>JUNE 29, 2006</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 2px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>TABLE OF CONTENTS</B></U>
</DIV>

<DIV align="center">
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE I</TD>
    <TD align="left" valign="top">DEFINITIONS AND INTERPRETATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined Above</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Terms Defined in Credit Agreement</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Defined Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Undefined Financial Accounting Terms</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles and Sections</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Number and Gender</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE II</TD>
    <TD align="left" valign="top">GRANT OF SECURITY INTEREST</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE III</TD>
    <TD align="left" valign="top">REPRESENTATIONS AND WARRANTIES</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Validity, Perfection and Priority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Liens; Other Financing Statements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Location of Debtor and Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tradenames; Prior Names</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE IV</TD>
    <TD align="left" valign="top">COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Chief Executive Office</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change of Name or Limited Liability Company Structure</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Maintain Records and Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Right of Inspection</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filings; Notifications</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE V</TD>
    <TD align="left" valign="top">ACCOUNTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor Remains Liable under Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collections on Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE VI</TD>
    <TD align="left" valign="top">POWER OF ATTORNEY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Appointment as Attorney-in-Fact</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Duty on the Part of Secured Party</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE VII</TD>
    <TD align="left" valign="top">REMEDIES; RIGHTS UPON DEFAULT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights and Remedies Generally</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Collection of Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Debtor&#146;s Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Possession of Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- i -<!-- /Folio -->
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Disposition of the Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Recourse</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses; Attorneys&#146; Fees</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application of Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Limitation on Duties Regarding Preservation of Collateral</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Claims</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7 .13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Discontinuance of Proceedings </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE VIII</TD>
    <TD align="left" valign="top">INDEMNITY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">INDEMNITY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indemnity Obligations Secured by Collateral; Survival</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="4" align="left">ARTICLE IX</TD>
    <TD align="left" valign="top">MISCELLANEOUS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Waiver; Remedies Cumulative</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination; Release</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marshalling</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severability</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing Statement Filing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices and Other Communications</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENTIRE AGREEMENT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GOVERNING LAW</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">JURISDICTION AND VENUE</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- ii -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>SECURITY AGREEMENT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
<B>SECURITY AGREEMENT </B>(this &#147;<u>Agreement</u>&#148;), dated as of June&nbsp;29, 2006, is by and between
<B>PRIME OFFSHORE L.L.C., </B>a Delaware limited liability company
(the &#147;<u>Debtor</u>&#148;) and <B>GUARANTY BANK, FSB,</B>
a federal savings bank, as Agent (&#147;<u>Secured Party</u>&#148;).
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><u>W</u>
<u>I</u> <u>T</u> <u>N</u> <u>E</u> <u>S</u> <u>S</u> <u>E</u>
<u>T</u> <u>H</u>:</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the terms and conditions of the Credit Agreement dated June&nbsp;29,
2006, by and among Debtor and the Secured Party (as amended, restated, or supplemented from time
to time, the &#147;<u>Credit Agreement</u>&#148;), the Secured Party has agreed to extend credit to or for the
benefit of Debtor; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, pursuant to the Credit Agreement and as an inducement to the Secured Party to extend
credit to or for the benefit of the Debtor pursuant to the Credit Agreement, Debtor has agreed to
execute this Agreement in favor of the Secured Party;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE I</B></U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>DEFINITIONS AND INTERPRETATION</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1
<U>Terms Defined Above</U>. As used herein, each of the terms
&#147;<u>Agreement</u>.&#148; &#147;<u>Credit
Agreement</u>,&#148; &#147;<u>Debtor</u>,&#148; and &#147;<u>Secured
Party</u>&#148; shall have the meaning assigned to such term hereinabove.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2
<U>Terms Defined in Credit Agreement</U>. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3
<U>Additional Defined Terms</U>. As used herein, each of the following terms shall have
the following meanings:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<u>Accounts</u>&#148; shall mean all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances, and other forms of obligations now owned or
hereafter received or acquired by or belonging or owing to Debtor (including,
without limitation, under any trade names, styles, or divisions thereto), whether
arising from the sale or lease of goods or the rendition of services or any other
transaction (including, without limitation, any such obligation which might be
characterized as an account, general intangible, other than contract rights under
contracts containing prohibitions against assignment of or the granting of a
security interest in the rights of a party thereunder, or chattel paper under the
Uniform Commercial Code in effect in any jurisdiction), and all rights of Debtor in,
to, and under all purchase orders now owned or hereafter received or acquired by it
for goods or services, and all rights of Debtor to any goods the sale or lease
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of which gave rise to any of the foregoing (including, without limitation, returned or repossessed
goods and rights of unpaid sellers), and all moneys due or to become due to Debtor under all
contracts for the sale or lease of goods or the performance of services (whether or not earned by
performance) or in connection with any other transaction, now in existence or hereafter arising,
including, without limitation, all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Debtor</U>&#148; shall mean each Person obligated on an Account, Chattel Paper, or
General Intangible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Account Records</U>&#148; shall mean (a)&nbsp;all original copies of all documents, instruments, or
other writings evidencing the Accounts, (b)&nbsp;all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to the Accounts, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping
systems, and other papers and documents relating to the Accounts, whether in the possession or
under the control of Debtor or any computer bureau or agent from time to time acting for or on
behalf of Debtor or otherwise, (c)&nbsp;all evidences of the filing of financing statements and the
registration of other instruments in connection therewith and amendments, supplements, or other
modifications thereto, notices to other creditors or secured parties, and certificates,
acknowledgements, or other writings, including, without limitation, lien search reports, from
filing or other registration offices, (d)&nbsp;all credit information, reports, and memoranda relating
thereto, and (e)&nbsp;all other written or non-written forms of information related in any way to the
foregoing or any Account.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Chattel Paper</U>&#148; shall mean all chattel paper (as such term is defined in Section&nbsp;9-105(a)(2)
of the UCC) of the Debtor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Collateral</U>&#148; shall have the meaning assigned to it in Article&nbsp;II.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Commodity Hedge Agreement</U>&#148; shall mean any agreement, device or arrangement entered
into by one Person with another Person providing for payments which are related to fluctuations in
the price of petroleum (or any fraction thereof), natural gas, or natural gas liquids (including,
but not limited to, swaps, caps, collars, options, puts, calls, futures and forward contracts).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>General Intangibles</U>&#148; shall mean all general intangibles (as such term is defined in
Section&nbsp;9-106 of the UCC) of Debtor, including, without limitation, rights to the payment of money
(other than Accounts), net profit interests, contracts, farmout agreements, licenses, and
franchises (excluding licenses and franchises which prohibit the assignment or grant of a security
interest by Debtor), federal income tax refunds, trade names, distributions on certificated
securities (as defined in &#167;8-102(a)(l) of the UCC) and uncertificated securities (as defined in
&#167;8-102(a)(2) of the UCC), computer programs and other computer software, inventions, designs,
trade secrets, goodwill, proprietary rights, customer
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">lists, supplier contracts, sale orders, correspondence, advertising
materials, payments due in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property, reversionary interests in
pension and profit-sharing plans and reversionary, beneficial and residual
interests in trusts, credits with and other claims against any Person, together
with any collateral for any of the foregoing and the rights under any security
agreement granting a security interest in such collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Indemnitees</U>&#148; shall mean the Secured Party and its shareholders, officers,
directors, employees, agents, attorneys-in-fact, and affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Proceeds</U>&#148;
shall mean proceeds (as such term is defined in Section&nbsp;9-306(a) of
the UCC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Rate Management Transaction</U>&#148; shall mean any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
Borrower and Lenders which is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward transaction, currency
swap transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to on or more interest
rates, foreign currencies, commodity prices, equity prices or other financial
measures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Obligations</U>&#148; shall mean the Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;UCC&#148; shall mean the Uniform Commercial Code as in effect from time to time in
the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4
<U>Undefined Financial Accounting Terms</U>. Undefined financial accounting terms used
in this Agreement shall have the meanings assigned to such terms according to GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5
<U>References</U>. The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148; &#147;hereinafter,&#148;
&#147;hereinbelow,&#148; &#147;hereof,&#148; &#147;hereunder,&#148; and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular Article, Section, or provision of this
Agreement. References in this Agreement to Articles, Sections, or Exhibits are to such Articles,
Sections, or Exhibits of this Agreement unless otherwise specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6
<U>Articles and Sections</U>. This Agreement, for convenience only, has been divided
into Articles and Sections; and it is understood that the rights and other legal relations of the
parties hereto shall be determined from this instrument as an entirety and without regard to the
aforesaid division into Articles and Sections and without regard to headings prefixed to such
Articles or Sections.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7
<U>Number and Gender</U>. Whenever the context requires, reference herein made to
the single number shall be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to include the
masculine, feminine and neuter, when such construction is appropriate; and specific enumeration
shall not exclude the general but shall be construed as cumulative. Definitions of terms defined
in the singular or plural shall be equally applicable to the plural or singular, as the case may
be, unless otherwise indicated.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE
II </B></U></div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>GRANT OF SECURITY INTEREST</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As security for the prompt and complete payment and performance in full of all Secured
Obligations, Debtor hereby assigns and transfers for the purpose of security and pledges to the
Secured Party and grants to the Secured Party a security interest in and continuing lien on all
right, title, and interest of Debtor in, to, and under the following, in each case, whether now
owned or existing or hereafter acquired or arising, and wherever located (all of which is herein
collectively called the &#147;<u>Collateral</u>&#148;):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Accounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Account Records;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Chattel Paper;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all General Intangibles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Commodity Hedge Agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all Rate Management Transactions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all accessions and additions to any or all of the foregoing, all
substitutions and replacements for any or all of the foregoing, and all Proceeds
and products of any or all of the foregoing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE
III</B></U></div>
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B> REPRESENTATIONS AND WARRANTIES</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1
<U>Validity, Perfection and Priority</U>. The security interests in the Collateral
granted to the Secured Party hereunder constitute valid and continuing security interests in the
Collateral. Upon the filing of financing statements, naming Debtor as &#147;debtor&#148; and the Secured
Party as &#147;secured party&#148; and describing the Collateral, in the filing offices set forth on Exhibit
A, the security interests granted to the Secured Party hereunder will constitute valid
first-priority
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">perfected security interests in all Collateral with respect to which a security interest can be
perfected by the filing of a financing statement, subject only to Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2
<U>No Liens; Other Financing Statements</U>. (a)&nbsp;Except for the Lien granted to the
Secured Party hereunder and Permitted Liens, Debtor owns each item of the Collateral free and clear
of any and all Liens, rights, or claims of all other Persons, and Debtor shall defend the
Collateral against all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;No financing statement or other evidence of Lien covering or purporting to cover any of
the Collateral is on file in any public office other than (i)&nbsp;financing statements in favor of the
Secured Party, (ii)&nbsp;financing statements for which proper termination statements have been
delivered to the Secured Party for filing, and (iii)&nbsp;financing statements filed in connection with
Permitted Liens.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3
<U>Location of Debtor and Collateral</U>. The chief executive office of Debtor is located
at 9821 Katy Freeway, Suite&nbsp;1050, Houston, Texas 77024. The primary copies of the Account Records
are located at, and all Accounts and General Intangibles are maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from, such chief
executive office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4
<U>Accounts</U>. (a)&nbsp;Each Account (i)&nbsp;is and will be, in all material respects, the
genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof,
representing an unsatisfied obligation of such Account Debtor, (ii)&nbsp;is and will be, in all material
respects, enforceable in accordance with its terms, (iii)&nbsp;is not and will not be subject to any
setoffs, defenses, taxes, counterclaims (except (A)&nbsp;with respect to refunds, returns, and
allowances in the ordinary course of business, and (B)&nbsp;to the extent that such Account may not yet
have been earned by performance), and (iv)&nbsp;is and will be, in all material respects, in compliance
with all applicable laws, whether federal, state, local, or foreign.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0px; text-indent: 35px">(b) No Accounts which are evidenced by Chattel Paper require the consent of the Account Debtor
in respect thereof in connection with their assignment hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5
<U>Tradenames; Prior Names</U>. Debtor has not conducted business under any name other
than F-W Oil Exploration L.L.C. and its current name during the last five years.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE IV</B><br><br> <B>COVENANTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor covenants and agrees with the Secured Party that from and after the date of this
Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1
<U>Further Assurances</U>. At any time and from time to time, upon the request of the
Secured Party, and at the sole expense of Debtor, Debtor will promptly and duly execute and
deliver any and all such further instruments, endorsements, powers of attorney, and other
documents, make such filings, give such notices, and take such further action as the Secured
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Party may reasonably deem desirable in obtaining the full benefits of this Agreement and the
rights, remedies, and powers herein granted, including, without limitation, the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the filing of financing statements, in form acceptable to the Secured Party
under the Uniform Commercial Code in effect in any jurisdiction with respect to the
liens and security interests granted hereby;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the performance of all searches of public records deemed necessary
by the Secured Party to establish and determine the priority of the security interests
of the Secured Party or to determine the presence or priority of other secured parties;
and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the furnishing to the Secured Party from time to time of reports and schedules
in connection with the Collateral as required pursuant to the Credit Agreement, all in
reasonable detail and in form reasonably satisfactory to the Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2
<U>Change of Chief Executive Office</U>. Debtor will not move its chief executive
office except to such new location as Debtor may establish in accordance with the last sentence of
this Section. The originals of all Account Records and General Intangibles will be kept at such
chief executive office or at the locations referred to in Section&nbsp;3.3, or at such new locations as
Debtor may establish in accordance with the last sentence of this Section. All Accounts, Account
Records, and General Intangibles of Debtor will be maintained at and controlled and directed
(including, without limitation, for general accounting purposes) from the locations referred to in
Section&nbsp;3.3 or such new locations as the Debtor may establish in accordance with the last sentence
of this Section. With respect to any new location, promptly upon the request of the Secured Party,
Debtor shall take all such action as the Secured Party may request to maintain the security
interest of the Secured Party in the Collateral granted hereby at all times fully perfected with
the same or better priority and in full force and effect. Debtor shall not establish a new location
for its chief executive office or such activities (or move any such activities from the locations
referred to in Section&nbsp;3.3) until it shall have given to the Secured Party not less than ten days&#146;
prior written notice of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Secured Party may reasonably request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3
<U>Change of Name or Limited Liability Company Structure</U>. Debtor shall not change
its name or limited liability company structure or conduct business under any name other than its
current name without giving notice thereof to the Secured Party within ten days thereafter, clearly
describing such new name, or limited liability company structure or such new tradename and
providing such other information in connection therewith as the Secured Party may reasonably
request. With respect to such new name, limited liability company structure, or tradename, promptly
upon the request of the Secured Party, Debtor shall take all such action as the Secured Party may
reasonably request to maintain the security interest of the Secured Party in the Collateral granted
hereby at all times fully perfected with the same or better priority and in full force and effect.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4
<U>Maintain Records and Accounts</U>. Debtor will keep and maintain, or cause to be kept
and maintained, at its own cost and expense satisfactory and complete records of the Collateral,
including, but not limited to, the originals of all documentation with respect to all Accounts and
General Intangibles and records of all payments received and all credits granted on the Accounts,
all merchandise returned, and all other dealings therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5
<U>Right of Inspection</U>. The Secured Party shall upon reasonable notice to Debtor
have full and free access during normal business hours of Debtor to all the books,
correspondence, and records of Debtor; and the Secured Party and its representatives may examine
the same, take extracts therefrom, and make photocopies thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6
<U>Possession of Collateral</U>. The Secured Party shall be deemed to have possession of
any of the Collateral in transit to it or set apart for it. Otherwise the Collateral shall remain
in Debtor&#146;s constructive possession and control at all times, at Debtor&#146;s risk of loss, and shall
(except for sales permitted by Section&nbsp;6.4 of the Credit Agreement) be kept at the locations
represented in Section&nbsp;3.3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7
<U>Financing Statement Filings; Notifications</U>. Debtor recognizes that financing
statements pertaining to the Collateral have been or will be filed with the offices of the
Secretary of State for the States listed in Exhibit&nbsp;A hereto. Debtor will immediately notify the
Secured Party of any condition or event that may change the proper location for the filing of any
financing statement or other public notice or recording for the purpose of perfecting a security
interest in the Collateral. Without limiting the generality of the foregoing, Debtor will (a)
notify the Secured Party within a reasonable period of time in advance of any change to a
jurisdiction other than as represented in Section&nbsp;3.3 hereof, (i)&nbsp;in the location of Debtor&#146;s chief
place of business, (ii)&nbsp;in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts Records, or (iii)&nbsp;in the
&#147;location&#148; of Debtor within the meaning of Section&nbsp;9-103(c) of the UCC, and (b)&nbsp;immediately notify
Secured Party of any change in Debtor&#146;s name. In any notice furnished pursuant to this Section,
Debtor will expressly state that the notice is required by this Agreement and contains facts that
will or may require additional filings of financing statements or other notices for the purpose of
continuing perfection of the Secured Party&#146;s security interest in the Collateral.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE V</B><br><br> <B>ACCOUNTS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1
<U>Debtor Remains Liable under Accounts</U>. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the Secured Party),
Debtor shall remain liable under each of the Accounts to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to each such Account. The Secured Party shall have no obligation or
liability under any Account (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating to such Account
pursuant hereto, nor shall the Secured Party be obligated in any manner to perform any of the
obligations of Debtor under or pursuant to any Account (or any agreement giving rise thereto), to
make any payment, to make any inquiry as to the nature or the sufficiency of any payment
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">received by it or as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action to enforce any
performance, or to collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2
<U>Collections on Accounts</U>. Prior to the occurrence of an Event of Default, the
Secured Party hereby authorizes Debtor to collect the Accounts. At any time following and during
the continuance of any Event of Default, the Secured Party may curtail or terminate said authority
at any time and itself, or by its agents, collect all Accounts, and any payments of Accounts
collected by Debtor shall be held by Debtor in trust for the Secured Party, segregated from other
funds of Debtor. All Proceeds, while held by the Secured Party (or by Debtor in trust for the
Secured Party) shall continue to be Collateral securing all of the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE VI</B><br><br><B>POWER OF ATTORNEY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1
<U>Appointment as Attorney-in-Fact</U>. Debtor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time in the discretion
of the Secured Party, for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of
the foregoing, Debtor hereby gives the Secured Party the power and right, on behalf of Debtor,
without notice to or assent by the Debtor, to do the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of any Account, at any time when the authority of Debtor to
collect the Accounts has been curtailed or terminated pursuant hereto, or in the case
of any other Collateral, at any time when any Event of Default shall have occurred and
be continuing, in the name of Debtor or its own name, or otherwise, to take possession
of and indorse and collect any checks, drafts, notes, acceptances, or other instruments
for the payment of moneys due under, or with respect to, any Collateral; in the name of
Debtor or otherwise to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Secured Party or as the Secured Party shall direct; to ask or demand
for, collect, receive payment of, and receipt for, any and all moneys, claims, and
other amounts due or to become due at any time in respect of or arising out of any
Collateral;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) at any time when an Event of Default shall have occurred and be continuing, to
prepare, sign, and file financing statements and amendments thereto in the name of
Debtor;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) at any time when an Event of Default shall have occurred and be continuing, to
take or cause to be taken all actions necessary to perform or comply
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">or cause performance or compliance with the terms of this Agreement, including,
without limitation, actions to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral, to effect any repairs or obtain any insurance
called for by the terms of this Agreement, and to pay all or any part of the
premiums therefor and the costs thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) upon the occurrence and during the continuance of any Event of Default, (i)
to sign and indorse any invoices, freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtor, assignments, verifications,
notices, and other documents in connection with any of the Collateral, (ii)&nbsp;to
commence and prosecute any suits, actions, or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any portion thereof and
to enforce any other right in respect of any Collateral, (iii)&nbsp;to defend any suit,
action, or proceeding brought against Debtor with respect to any Collateral, (iv)&nbsp;to
settle, compromise, or adjust any suit, action, or proceeding described in the
preceding clause and, in connection therewith, to give such discharges or releases as
the Secured Party may deem appropriate, and (v)&nbsp;generally, to sell or transfer and
make any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the option of the Secured Party and the expense of Debtor,
at any time, or from time to time, all acts and things which the Secured Party deems
necessary to protect, preserve, or realize upon the Collateral and the Liens of the
Secured Party thereon and to effect the intent of this Agreement, all as fully and
effectively as Debtor might do; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) at any time when an Event of Default shall have occurred and be continuing,
to execute, in connection with any foreclosure, any endorsements, assignments, or
other instruments of conveyance or transfer with respect to the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable
so long as any Obligation remains outstanding or any Commitment exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2
<U>No Duty on the Part of Secured Party</U>. The powers conferred on the Secured Party
hereunder are solely to protect the interests of the Secured Party in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the exercise of such powers,
and, except for its willful misconduct and/or own gross negligence, neither it nor any of its
officers, directors, employees, or agents shall be responsible to the Debtor for any act or failure
to act hereunder.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE VII</B><br><br> <B>REMEDIES; RIGHTS UPON DEFAULT</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1
<U>Rights and Remedies Generally</U>. If an Event of Default shall occur and be
continuing, then and in every such case, the Secured Party shall have all the rights of a secured
party under the UCC, all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, all rights set forth in
this Agreement and the other Loan Documents. No enumeration of rights in this Section or
elsewhere in this Agreement or in any other Loan Document or other agreement shall be deemed to in
any way limit the rights of the Secured Party as described in this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2
<U>Proceeds</U>. If an Event of Default shall occur and be continuing, in addition to the
rights of the Secured Party specified with respect to the payment of Accounts, (a)&nbsp;all Proceeds
received by Debtor consisting of cash, checks, and other near-cash items shall be held by Debtor in
trust for the Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form received by Debtor
(appropriately indorsed or assigned by the Debtor to the order of the Secured Party or in such
other manner as shall be satisfactory to the Secured Party), and (b)&nbsp;any and all such Proceeds
received by the Secured Party (whether from Debtor or otherwise), or any part thereof, shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3
<U>Collection of Accounts</U>. If an Event of Default shall occur and be continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Secured Party may instruct the obligor or obligors on any obligation owing
or purporting to be owed to Debtor constituting the Collateral (including, without
limitation, the Accounts) to make any payment required by the terms of such obligation
directly to the Secured Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Secured Party shall have the right from time to time to modify (including,
without limitation, to extend the time for payment or arrange for payment in
installments) or waive rights under any such obligation and to compromise or settle
counterclaims or setoffs with the obligor under any such obligation; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any and all of such proceeds of such collections paid to the Secured Party, or
any part thereof, (after deduction of the Secured Party&#146;s expenses of collection,
including, without limitation, reasonable attorneys&#146; fees and disbursements), shall be
applied by the Secured Party as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4
<U>Disposition of Collateral</U>. If an Event of Default shall occur and be continuing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Secured Party may direct Debtor to sell, assign, or otherwise liquidate
or dispose of all or from time to time any portion of the Collateral, and Debtor
shall do so, and the Secured Party may take possession of the Proceeds of such
Collateral. The Secured Party may direct Debtor to direct that all Proceeds
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">of such Collateral be paid directly to the Secured Party or may permit the
Proceeds of such Collateral to be paid to Debtor and all such Proceeds consisting of
cash, checks, or near-cash items shall be held by Debtor in trust for the Secured
Party, segregated from other funds of Debtor in a separate deposit account
containing only Proceeds and shall forthwith upon receipt by Debtor, be turned over
to the Secured Party, in the same form received by Debtor (appropriately indorsed or
assigned by Debtor to the order of the Secured Party or in such other manner as
shall be satisfactory to the Secured Party); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any and all such Proceeds received by the Secured Party (whether from
Debtor or otherwise), shall be applied by the Secured Party as provided in Section
7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Debtor&#146;s Accounts.</U> If an Event of Default shall occur and be continuing, the
Secured Party may liquidate any securities held in any accounts of Debtor and apply the proceeds
thereof and any other amounts held in any accounts of Debtor as provided in Section&nbsp;7.10 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Possession of Collateral.</U> If an Event of Default shall occur and be continuing,
(a)&nbsp;the Secured Party may, personally or by agents or attorneys, immediately retake possession of
the Collateral (including the originals of all or any Accounts and Account Records) or any part
thereof, from Debtor or any other Person which then has possession of any part thereof with or
without notice or judicial process, and for that purpose may enter upon Debtor&#146;s premises where any
of the Collateral is located and remove the same and may make reasonable use in connection with
such removal of any and all services, supplies, aids, and other facilities of Debtor, and (b)&nbsp;upon
three days&#146; notice to Debtor, Debtor shall, at its own expense, assemble the Collateral, including,
without limitation, the originals of all Account Records (or from time to time any portion thereof)
and make it available to the Secured Party by delivery to the Secured Party at any location
designated by the Secured Party which is reasonably convenient to both parties, whether at the
premises of Debtor or the Secured Party or elsewhere. Debtor shall, at its sole expense, store and
keep any Collateral so assembled at such place or places pending further action by the Secured
Party and while the Collateral shall be so stored and kept, provide such guards and maintenance
services as shall be reasonably necessary to protect the same and to preserve and maintain the
Collateral in good condition. Debtor&#146;s obligation to so assemble and deliver the Collateral is of
the essence of this Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific performance by the
Debtor of such obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Disposition of the Collateral.</U> If an Event of Default shall occur and be
continuing, the Secured Party may sell, assign, lease, give an option or options to purchase, or
otherwise dispose of the Collateral (or contract to do any of the foregoing) under one or more
contracts or as an entirety, and, to the extent permitted by applicable law, without the necessity
of gathering at the place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the Secured Party at
any location of any third party conducting or otherwise involved in such sale or any office of the
Secured Party or elsewhere and in general in such manner, at such time or times and upon such terms
and conditions and at such price as may be commercially reasonable, for cash or on credit
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or for future delivery without assumption of any credit risk. Any of the Collateral may be
sold, leased, assigned, or options or contracts entered to do so, or otherwise disposed of, in the
condition in which the same existed when taken by the Secured Party or after any overhaul or repair
which may be commercially reasonable. Any such disposition which shall be a private sale or other
private proceeding shall be made upon not less than ten days&#146; written notice to Debtor specifying
the time after which such disposition is to be made and the intended sale price or other
consideration therefor. Any such disposition which shall be a public sale shall be made upon not
less than ten days&#146; written notice to Debtor (which Debtor agrees to be commercially reasonable)
specifying the time and place of such sale and, in the absence of applicable requirements of law to
the contrary, shall be by public auction (which may, at the option or the Secured Party, be subject
to reserve), after publication of commercially reasonable notice of such auction. To the extent
permitted by applicable law, the Secured Party may bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section without
accountability to Debtor (except to the extent of surplus money received) as provided below. In the
payment of the purchase price of the Collateral, the purchaser shall be entitled to have credit on
account of the purchase price thereof of amounts owing to such purchaser on account of any of the
Secured Obligations and any such purchaser may deliver notes, claims for interest, or claims for
other payment with respect to such Secured Obligations in lieu of cash up to the amount which
would, upon distribution of the net proceeds of such sale, be payable thereon. Such notes, if the
amount payable hereunder shall be less than the amount due thereon, shall be returned to the holder
thereof after being appropriately stamped to show partial payment. Notwithstanding the foregoing,
if the Collateral or any portion thereof is perishable or threatens to decline speedily in value or
is of a type customarily sold in a recognized market only such notice as shall be reasonably
practicable shall be required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Recourse.</U> Debtor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to satisfy the Secured Obligations.
Debtor shall also be liable for all reasonable expenses of the Secured Party incurred in connection
with collecting such deficiency, including, without limitation, the reasonable fees and
disbursements of any attorneys employed by the Secured Party to collect such deficiency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Expenses; Attorneys&#146; Fees.</U> Debtor shall reimburse the Secured Party for all its
reasonable expenses in connection with the exercise of its rights and remedies hereunder,
including, without limitation, reasonable attorneys&#146; fees and legal expenses incurred by the
Secured Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Application of Proceeds.</U> The proceeds of any disposition of Collateral shall be
applied as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) to the payment of any and all reasonable expenses and fees (including
attorneys&#146; fees and disbursements) incurred by the Secured Party in connection with
the exercise of its rights and remedies hereunder, including, without limitation,
reasonable expenses and fees in connection with obtaining, taking possession of,
removing, holding, insuring, repairing, preparing for sale or lease, storing and
disposing of Collateral;
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 12 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to the satisfaction of the Secured Obligations in such order as the
Secured Party may elect; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) after the indefeasible payment in full in cash of all Secured Obligations, to
Debtor or to whomever may lawfully be entitled to receive the same or as a court of
competent jurisdiction may direct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Limitation on Duties Regarding Preservation of Collateral.</U> The Secured Party&#146;s
sole duty with respect to the custody, safekeeping, and physical preservation of the Collateral in
its possession, under Section&nbsp;9.207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Secured Party deals with similar property for its own account. The Secured Party
shall have no obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting willful misconduct and/or gross negligence, neither
the Secured Party nor any of its directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Debtor or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Waiver of Claims.</U> Except as otherwise provided in this Agreement, Debtor hereby
waives, to the extent permitted by applicable law, notice of and judicial hearing in connection
with the Secured Party&#146;s taking possession or the Secured Party&#146;s disposition of any of the
Collateral in accordance herewith, including, without limitation, any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the Debtor would otherwise
have under the constitution or any statute of the United States or any state, and Debtor hereby
further waives, to the extent permitted by law:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all damages occasioned by such taking of possession except any damages which
are the direct result of the willful misconduct and/or gross negligence of the Secured
Party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all other requirements as to the time, place, and terms of sale or other
requirements with respect to the enforcement of the rights of the Secured Party
hereunder;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) demand of performance or other demand, notice of intent to demand or
accelerate, notice of acceleration, presentment, protest, advertisement, or notice of
any kind to or upon Debtor or any other Person, except as may be required by the Credit
Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all rights of redemption, appraisement, valuation, diligence, stay, extension,
or moratorium now or hereafter in force under any applicable law in order to stay or
delay the enforcement of this Agreement, including the absolute sale of the Collateral
or any portion thereof, and Debtor, for itself and all who may claim under it, insofar
as it or they now or hereafter lawfully may, hereby waives the benefit of all such
laws.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 13 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Discontinuance of Proceedings.</U> In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this Agreement by
foreclosure, sale, entry, or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason, then and in every such case, Debtor and the Secured Party shall be
returned to their former positions and rights hereunder with respect to the Collateral subject to
the security interest created under this Agreement, and all rights, remedies, and powers of the
Secured Party shall continue as if no such proceeding had been instituted.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE VIII</B><br><br> <B>INDEMNITY</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1
<U><B>INDEMNITY.</B></U><B> (a)&nbsp;DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE INDEMNITEES
HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, ACTIONS,
JUDGMENTS, SUITS, REASONABLE COSTS, REASONABLE EXPENSES, OR REASONABLE DISBURSEMENTS (INCLUDING
REASONABLE ATTORNEYS&#146; FEES AND EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE FOREGOING
ARE COLLECTIVELY CALLED &#147;EXPENSES&#148;) OF WHATSOEVER KIND OR NATURE WHICH MAY BE IMPOSED ON, ASSERTED
AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE
ADMINISTRATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS OF
OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL
BE INDEMNIFIED PURSUANT TO THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE WILLFUL
MISCONDUCT AND/OR GROSS NEGLIGENCE OF SUCH INDEMNITEE.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Debtor agrees that upon written notice by any such Indemnitee of any assertion that
could give rise to an Expense, Debtor shall assume full responsibility for the defense thereof.
Without limiting the application of part (a)&nbsp;of this Section, Debtor agrees to pay or reimburse
such Indemnitee on demand for any and all reasonable fees, costs, and expenses of whatever kind or
nature incurred in connection with the creation, preservation, or protection of the Secured Party&#146;s
Liens on, and security interests in, the Collateral, including, without limitation, all reasonable
fees and taxes in connection with the recording or filing of instruments and documents in public
offices, payment, or discharge of any taxes or Liens or security interests upon or in respect of
the Collateral, premiums for insurance with respect to the Collateral, all reasonable expenses
incurred in the custody, preservation, use, or operation of the Collateral when Collateral is in
the Secured Party&#146;s possession, and all other reasonable fees, costs, and expenses in connection
with protecting, maintaining, or preserving the Collateral and the Secured Party&#146;s interest
therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits, or proceedings arising out of or relating to the Collateral.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 14 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Without limiting the application of parts (a)&nbsp;or (b)&nbsp;of this Section, Debtor agrees
to pay, indemnify, and hold each Indemnitee harmless from and against any Expenses which such
Indemnitee may suffer, expend, or incur in consequence of or growing out of any misrepresentation
by any Debtor in this Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If and to the extent that the obligations of Debtor under this Section are unenforceable
for any reason, Debtor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Indemnity Obligations Secured by Collateral; Survival.</U> Any amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Collateral. The indemnity obligations of the Debtor contained in this
Article&nbsp;VIII shall continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ARTICLE IX</B><br><br> <B>MISCELLANEOUS</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>No Waiver; Remedies Cumulative.</U> No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no course of dealing
between any Debtor and the Secured Party shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. A waiver by the Secured Party of
any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Secured Party would otherwise have on any future occasion. The rights and
remedies herein expressly provided are cumulative, may be exercised singly or concurrently and as
often and in such order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or now or hereafter
existing under applicable law. No notice to or demand on Debtor in any case shall entitle Debtor to
any other or further notice or demand in similar or other circumstances or constitute a waiver of
the rights of the Secured Party to any other or further action in any circumstances without notice
or demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2
<U>Termination; Release.</U> When the Secured Obligations have been indefeasibly paid and
performed in full and the Commitment has terminated, this Agreement shall terminate, and the
Secured Party, at the request and sole expense of Debtor, will execute and deliver to Debtor the
proper instruments (including Uniform Commercial Code termination statements)
acknowledging the termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever, such of the
Collateral as may be in possession of the Secured Party and has not theretofore been disposed of,
applied, or released.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Counterparts.</U> This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so executed and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 15 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">delivered shall be an original, but all of which shall together constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Marshalling.</U> The Secured Party shall not be under any obligation to marshall any
assets in favor of Debtor or any other Person or against or in payment of any or all of the Secured
Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5
<U>Severability.</U> In case any provision in or obligation under this Agreement or the
Secured Obligations shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Financing Statement Filing.</U> A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu of the original to
the extent permitted by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Notices and Other Communications.</U> Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this Agreement shall be in
writing (including by telecopy). Unless otherwise expressly provided herein, any such notice,
request, or communication shall be deemed to have been duly given or made when provided in
accordance with the terms of the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Parties in Interest.</U> This Agreement shall be binding upon and inure to the benefit
of Debtor, the Secured Party, and their respective legal representatives, successors, and assigns.
No other Person shall have any right, benefit, priority, or interest hereunder or as a result
hereof or have standing to require satisfaction of provisions hereof in accordance with their
terms, and any or all of such provisions may be freely waived in whole or in part by the Secured
Party at any time if the Secured Party in its sole discretion deems it advisable to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Amendments.</U> Neither this Agreement nor any provision hereof may be amended,
supplemented, modified, discharged, or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the amendment, supplement, modification, discharge,
or termination is sought.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10 <U><B>ENTIRE AGREEMENT.</B></U><B> THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY
PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT
HEREOF. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG SUCH PARTIES.</B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11
<U><B>GOVERNING LAW.</B></U><B> THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAWS).</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U><B>JURISDICTION AND VENUE.</B></U><B> ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING
DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT TO WHICH ANY DEBTOR IS A PARTY MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION
OF THE SECURED PARTY, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR HEREBY
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN
HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE SECURED PARTY IN ACCORDANCE
WITH THIS SECTION.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF,</B> this Agreement is executed as of the date first above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><u><B>DEBTOR</B></u><B>: <BR>
<BR>
PRIME OFFSHORE L.L.C.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/     Jim R. Brock
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jim R. Brock&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><u><B>SECURED PARTY</B></u><B>:<BR>
<BR>
GUARANTY BANK, FSB, AS AGENT</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/      Kelly L. Elmore, III
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Kelly L. Elmore, III&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Senior Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT A</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;3.1: &nbsp;&nbsp; FILING LOCATIONS

</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Secretary of State of Delaware
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->A-i<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.27.1
<SEQUENCE>16
<FILENAME>d44173exv10w27w1.htm
<DESCRIPTION>MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w27w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.27.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,<BR>
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)</U>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">FROM

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PRIME
OFFSHORE L.L.C. <br>(fka F-W Oil Exploration L.L.C.)</B><BR>
Taxpayer Identification Number: 76-0688905<BR>
(Mortgagor and Debtor)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">TO

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Arthur R. Gralla, Jr., Trustee<BR>
for the benefit of

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GUARANTY BANK, FSB, </B>Agent<BR>
(Mortgagee and Secured Party)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Effective June&nbsp;29, 2006

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For purposes of filing this Deed of Trust as a financing statement, the mailing address of
Mortgagor is 9821 Katy Freeway, Suite&nbsp;1050, Houston, Texas 77024; the mailing address of Mortgagee
is 333 Clay Street, Suite&nbsp;4400, Houston, Texas 77002-4103.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;
&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>
&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;
<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>&nbsp;&nbsp;&nbsp;<FONT style="font-family: Wingdings">&#118;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This instrument, prepared by R. H. Walls, Jackson Walker L.L.P., 1401 McKinney, Suite&nbsp;1900,
Houston, Texas 77010, 713-752-4200, contains after-acquired property provisions and covers future
advances and proceeds to the fullest extent allowed by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>ATTENTION OF RECORDING OFFICER:</U> This instrument is a mortgage of both real and personal
property and is, among other things, a Security Agreement and Financing Statement under the Uniform
Commercial Code. This instrument creates a lien on rights in or relating to lands of Mortgagor
which are described in Exhibit&nbsp;A hereto or in documents described in Exhibit&nbsp;A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">RECORDED DOCUMENT SHOULD BE RETURNED TO:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">JACKSON WALKER L.L.P.<BR>
1401 McKinney, Suite&nbsp;1900<BR>
Houston, Texas 77010<BR>
Attn.: Jessica Johnson
</DIV>


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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>MORTGAGE,
DEED OF TRUST, SECURITY AGREEMENT,<BR>
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Mortgage, Deed of Trust, Security Agreement, Financing Statement, and Assignment of
Production (this &#147;<U>Deed of Trust</U>&#148;) is executed pursuant to the Credit Agreement dated as of as of
June&nbsp;29, 2006, by and among
<B><FONT style="font-variant: SMALL-CAPS">Prime offshore</FONT> L.L.C. (fka F-W Oil Exploration L.L.C.), </B>a Delaware
limited liability company, as Borrower (herein, &#147;<U>Mortgagor</U>&#148;), and <FONT style="font-variant: SMALL-CAPS"><B>Guaranty Bank, </B></FONT><B>FSB, </B>a
federal savings bank, individually as a Lender and as Agent for the lenders signatory thereto from
time to time (the &#147;Lenders&#148;) (as amended, restated, or supplemented from time to time, the &#147;<U>Credit
Agreement</U>&#148;). Capitalized terms used but not defined herein shall have the meanings assigned to
such terms in the Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgagor, acting herein by and through its proper officers who have heretofore been duly
authorized, whose mailing address is 9821 Katy Freeway, Suite&nbsp;1050, Houston, Texas 77024, hereby
agrees as follows:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 1 </U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>GRANT</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <U>Lien.</U> Mortgagor, for valuable consideration, the receipt of which is hereby
acknowledged, and in consideration of the debt and trust hereinafter mentioned, has granted,
bargained, sold, conveyed, transferred and assigned, and by these presents does grant, bargain,
sell, convey, transfer and assign to Arthur R. Gralla, Jr., Trustee, whose address is c/o Guaranty
Bank, FSB, 333 Clay Street, Suite&nbsp;4400, Houston, Texas 77002-4103, and his successors and
substitutes in trust, as hereinafter provided (the &#147;<U>Trustee</U>&#148;), for the benefit of Guaranty Bank,
FSB, as Agent for the lenders, with banking quarters in Houston, Harris County, Texas, the mailing
address for which is 333 Clay Street, Suite&nbsp;4400, Houston, Texas 77002-4103 (herein &#147;<U>Mortgagee</U>&#148;),
the following described Property:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in and to the leases, rights of way, easements, or
other documents described in <U>Exhibit&nbsp;A,</U> attached hereto and incorporated
herein for all purposes or described or referred to in the documents described in
<U>Exhibit&nbsp;A,</U> without regard to any surface acreage and/or depth limitations
set forth in <U>Exhibit&nbsp;A,</U> and all renewals and extensions thereof and all new
leases, rights of way, easements, or other documents (i)&nbsp;in which an interest is
acquired by Mortgagor after the termination or expiration of any lease, right of
way, easement, or other document described or referred to in
<U>Exhibit&nbsp;A</U>, and
(ii)&nbsp;that covers all or any part of the Property described in and covered by such
terminated or expired lease, right of way, easement, or other document, to the
extent, and only to the extent, such new leases, rights of way, easements, or other
documents may cover such Property (all of the foregoing in this subsection (a)&nbsp;being
the &#147;<U>Leases</U>&#148;);
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in and to the lands subject to the Leases or
otherwise described or referred to in <U>Exhibit&nbsp;A,</U> without regard to any surface
acreage and/or depth limitations set forth in <U>Exhibit&nbsp;A</U> (the &#147;Lands&#148;),
including, without limitation, the oil, gas, mineral, and leasehold estates in and to
the Lands;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in and to any of the oil, gas, and minerals in, on,
or under the Lands, including, without limitation, all contractual rights, fee
interests, leasehold interests, overriding royalty interests, non-participating royalty
interests, mineral interests, production payments, net profits interests, or any other
interest measured by or payable out of production of oil, gas, or other minerals from
the Leases and/or Lands;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all of the foregoing interests of Mortgagor as such interests may be enlarged
by the discharge of any payments out of production or by the removal of any charges or
encumbrances;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in, to, and under or derived from any present or
future operating, farmout, bidding, pooling, unitization, and
communitization agreements, assignments, and subleases, whether or not described in
<U>Exhibit&nbsp;A,</U> to the extent, and only to the extent, that such agreements,
assignments, and subleases cover or include any right, title, and interest, whether now
owned and existing or hereafter acquired or arising, of Mortgagor in and to all or any
portion of the Leases and/or the Lands, and all units created by any such pooling,
unitization, and communitization agreements and all units formed under orders,
regulations, rules, or other official acts of any Governmental Authority having
jurisdiction, to the extent and only to the extent that such units cover or include all
or any portion of the Leases and/or the Lands;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in, to, and under or derived from all presently
existing and future advance payment agreements, oil, casinghead gas, and gas sales,
exchange, and processing contracts and agreements, including, without limitation, those
contracts and agreements that are described or referred to in <U>Exhibit&nbsp;A,</U> to the
extent, and only to the extent, those contracts and agreements cover or include all or
any portion of the Leases and/or the Lands; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) all right, title, and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in, to, and under or derived from all existing and
future permits, licenses, easements, and similar rights and privileges that relate to
or are appurtenant to any of the Leases and/or the Lands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <U>Security Interest.</U> Mortgagor, for the same consideration, hereby grants to
Mortgagee a continuing security interest in all improvements and all personal Property of any kind
or character defined in and subject to the provisions of the Uniform Commercial Code (&#147;<U>UCC</U>&#148;),
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">including, but not limited to, substitutions and replacements for, accessions to, and the proceeds
and products from any and all of such improvements and personal Property, as well as any and all
&#147;as-extracted collateral&#148; as such term is defined in the UCC, whether now owned and existing or
hereafter acquired or arising, and situated on any of the Lands, including, but not limited to,
pipe, casing, tubing, rods, storage tanks, boilers, loading racks, pumps, foundations, warehouses,
and all other personal Property and equipment of every kind and character upon, incident,
appurtenant, or belonging to and used in connection with the interest of Mortgagor, whether now
owned and existing or hereafter acquired or arising, in the Lands and/or the Leases, including all
oil, gas, and other minerals produced or to be produced to the account of Mortgagor from the Lands
and all accounts receivable, general intangibles, and contract rights of Mortgagor in connection
with the Lands and/or the Leases and all proceeds, products, substitutions, and exchanges thereof
(the Lands, the Leases, and the real and personal Property interests described in this Section
being the <U>&#147;Mortgaged Property</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <U>Assignment of Security.</U> Mortgagor, for the same consideration, hereby grants to
Mortgagee any and all rights of Mortgagor to Liens securing payment of proceeds from the sale of
production from the Mortgaged Property.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <U>After-Acquired Property.</U> Mortgagor, for the same consideration, hereby grants,
bargains, sells, conveys, transfers, and assigns to the Trustee or grants to Mortgagee a continuing
security interest in, as the case may be, all additional right, title, or interest which Mortgagor
may hereafter acquire or become entitled to in the interests, Properties, Lands, Leases, and
premises aforesaid, and in the oil, gas, or other minerals in and under or produced from or
attributable to any of the Lands or Leases, which additional right, title, and interest, when
acquired, shall constitute &#147;Mortgaged Property,&#148; the same as if expressly described and conveyed
herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <U>Habendum.</U> TO HAVE AND TO HOLD all and singular the Mortgaged Property and all
other Property which, by the terms hereof, has or may hereafter become subject to the Liens of this
Deed of Trust, together with all rights, hereditaments, and appurtenances in anywise belonging
thereto, to the Trustee or Mortgagee, as the case may be, or the successors or assigns of either of
them forever.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 2 </U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>INDEBTEDNESS SECURED</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This conveyance is made, IN TRUST, HOWEVER, to secure and enforce the payment of the
following indebtedness, obligations, and liabilities:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Specific Obligations.</U> The Obligations, including, without limitation, the
indebtedness evidenced by (a)&nbsp;the Credit Agreement, and (b)&nbsp;the Promissory Note dated June&nbsp;29,
2006, executed by Mortgagor to the order of the Lenders pursuant to the Credit Agreement in the
aggregate face amount of up to $200,000,000, bearing interest and being payable as provided therein
or as provided in the Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Additional Indebtedness.</U><BR>
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Payment of and performance of any and all present or future obligations of
Mortgagor under Commodity Hedge Agreements, as defined in the Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Payment of and performance of any and all present or future obligations of
Mortgagor under any Rate Management Transaction, as defined in the Credit Agreement,
entered into by and between Mortgagor and a Lender.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Payment of and performance of any and all present or future obligations of
Mortgagor under any guaranty in favor of Lenders of any of the Mortgagor&#146;s subsidiary&#146;s
obligations under Commodity Hedge Agreements and Rate Management Transactions and all
present or future obligations of Mortgagor or Mortgagor&#146;s subsidiaries under
Commodity Hedge Agreements and Rate Management Transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Other and Further Indebtedness.</U> This Deed of Trust is intended to secure a
revolving credit line as set forth in the Credit Agreement. If intermediate paydowns by Mortgagor
reduce the outstanding Indebtedness to zero, it is intended that the Liens created under this Deed
of Trust shall remain in full force and effect as long as any Commitment exists. In addition, it
is contemplated that Mortgagor may from time to time borrow additional sums of money from or
otherwise be or become obligated to Lenders. This Deed of Trust is given to secure any and all
indebtedness of Mortgagor, present or future, either direct or indirect, primary or secondary,
fixed or contingent, which Mortgagor may now or hereafter owe, or as to which Mortgagor may in any
manner become obligated to Lenders for payment, including, without limitation, indebtedness arising
by way of guaranty as to obligations of another to Lenders and indebtedness originally owed to a
party other than Lenders but which becomes owing to Lenders as the result of Lenders having
acquired the right to payment thereof. This Deed of Trust shall likewise secure not only the above
described indebtedness, but any and all renewals for any period, extensions, and rearrangements of
all or any portion thereof; and the Liens under this Deed of Trust shall be cumulative of all other
Liens and security of any and every other kind or character whatsoever securing the above-described
indebtedness. Notwithstanding the foregoing, it is not the intention of the parties hereto to
extend the Liens of this Deed of Trust so as to violate, or give rise to an allegation of violation
of, any provision of any statute, regulation, rule, ordinance or order of any applicable
jurisdiction, or any agency or subdivision of any of such jurisdictions. In this connection, this
Deed of Trust shall not, solely as to the relevant indebtedness, serve as security for any
indebtedness when for it to do so would violate any provision of any statute, regulation, rule,
ordinance or order of any applicable jurisdiction, or any agency or subdivision of any of such
jurisdictions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Indebtedness.</U> The word &#147;<U>Indebtedness</U>&#148; wherever used in this Deed of Trust shall
refer to all present and future debts, obligations, and liabilities described or referred to in
this Article&nbsp;2, subject, however, to the limitations provided hereinabove in this Article&nbsp;2.
</DIV>


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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 3 </U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>WARRANTIES</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Warranty of Title.</U> Mortgagor hereby binds itself, its legal representatives,
successors, and assigns, to warrant and forever defend all and singular the Mortgaged Property to
the Trustee and the successors and assigns of the Trustee forever against every Person whomsoever
lawfully claiming or to claim the same or any part thereof. Notwithstanding that this Deed of Trust
covers all of the right, title, and interest, whether now owned and existing or hereafter acquired
or arising, of Mortgagor in and to the Mortgaged Property, Mortgagor, for itself, its legal
representatives, successors, and assigns, further covenants, represents, and warrants that
Mortgagor has good and indefeasible title to the Mortgaged Property and that the interests of
Mortgagor in and to the Leases and/or Lands described in <U>Exhibit&nbsp;A</U> are not greater than the
working interest nor less than the net revenue interest, overriding royalty interest, net profit
interest, production payment interest, royalty interest, or other interest payable out of or
measured by production set forth in connection with each oil and gas well described in <U>Exhibit
A.</U> In the event Mortgagor owns any other or greater interest, such additional interest is
nonetheless included in, covered by, and subject to the liens and security interests created by
this Deed of Trust.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Additional Warranties.</U> In consideration of the Indebtedness, Mortgagor, for
itself, its legal representatives, successors, and assigns, covenants, represents, and warrants
that:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Leases in Effect.</U> All of the Leases specifically described or
referred to in <U>Exhibit&nbsp;A</U>, are in full force and effect. All covenants, express
or implied, in respect of the Leases specifically described or referred to in
<U>Exhibit&nbsp;A,</U> or of any assignment of any of such Leases, which may affect the
validity of any of such Leases, have been performed insofar as such Leases pertain to
the Lands.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Interests Free of Liens.</U> The interests of Mortgagor in the Mortgaged
Property are free and clear of all Liens except for Permitted Liens. All gross
production taxes and all taxes as to which non-payment could result in a Lien against
any of the Mortgaged Property have been paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Representations and Warranties.</U> As of the date hereof, all
representations and warranties of Mortgagor set forth in the Credit Agreement are true
and correct in all material respects, except to the extent such representations and
warranties relate solely to an earlier date, and all such representations and
warranties are hereby remade by Mortgagor to Mortgagee.
</DIV>

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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 4</U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>COVENANTS OF MORTGAGOR</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the Indebtedness, Mortgagor, for itself, its legal representatives,
successors, and assigns, covenants and agrees as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Maintenance of Leases.</U> Mortgagor will keep and continue all Leases, estates, and
interests herein described and all contracts and agreements relating thereto in full force and
effect in accordance with the terms thereof and will not permit the same to lapse or otherwise
become impaired for failure to comply with the obligations thereof, whether express or implied, In
this connection, Mortgagor shall not release any of the Leases without the prior written consent of
Mortgagee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Maintenance of Property.</U> Mortgagor will keep and maintain all
improvements, personal Property, and equipment now or hereafter situated on the Lands and
constituting a portion of the Mortgaged Property and used or obtained in connection therewith in
good repair and condition, ordinary wear and tear excepted, and will not tear down or remove the
same or permit the same to be torn down or removed without the prior consent of Mortgagee, except
in the usual course of operations as may be required for replacement when otherwise in compliance
with the provisions of this Deed of Trust and the Credit Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Pooling or Unitization.</U> Mortgagor will not, without the prior written consent of
Mortgagee, pool or unitize all or any part of the Mortgaged Property where the pooling or
unitization would result in the diminution of the net revenue interest of Mortgagor in production
from the pooled or unitized lands attributable to the Mortgaged Property constituting a portion of
such pooled or unitized lands. Immediately after the formation of any pool or unit in accordance
herewith, Mortgagor will furnish to Mortgagee a conformed copy of the pooling agreement,
declaration of pooling, or other instrument creating the pool or unit. The interest of Mortgagor
included in any pool or unit attributable to the Mortgaged Property or any part thereof shall
become a part of the Mortgaged Property and shall be subject to the Liens hereof in the same manner
and with the same effect as though the pool or unit and the interest of Mortgagor therein were
specifically described in <U>Exhibit&nbsp;A.</U> In the event any proceedings of any Governmental
Authority which could result in pooling or unitizing all or any part of the Mortgaged Property are
commenced, Mortgagor shall give immediate written notice thereof to Mortgagee. Any pooling or
unitization of all or any part of the Mortgaged Property in violation of this Section shall be of
no force or effect against the Trustee or Mortgagee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Operation of Mortgaged Property.</U> Mortgagor will operate or, to the extent that the
right of operation is vested in others, will exercise its best efforts to require the operator to
operate the Mortgaged Property and all wells now or hereafter located thereon continuously and in a
prudent and workmanlike manner in accordance with the best usage of the field and in accordance
with all applicable Requirements of Law. Mortgagor will comply with all terms and conditions of the
Leases and each assignment or contract obligating Mortgagor in any way with respect to the
Mortgaged Property; but nothing herein shall be construed to empower Mortgagor to bind the Trustee
or Mortgagee to any contract or obligation or render the Trustee or Mortgagee in any way
responsible or liable for bills or obligations incurred by Mortgagor.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Compliance with Operating Agreements.</U> Mortgagor agrees to promptly pay all bills
for labor and materials incurred in the operation of the Mortgaged Property and will promptly pay
its share of all costs and expenses incurred under any joint operating agreement affecting the
Mortgaged Property or any portion thereof; will furnish Mortgagee, as and when requested, full
information as to the status of any joint account maintained with others under any such operating
agreement; will not take any action to incur any liability or Lien thereunder; and will not enter
into any new operating agreement or any amendment of any existing operating agreement affecting the
Mortgaged Property without the prior written consent of Mortgagee. Furthermore, Mortgagor will not
consent or agree to participate in any proposed operation under any presently existing operating
agreement affecting the Mortgaged Property unless Mortgagor obtains the prior written consent of
Mortgagee and, if requested by Mortgagee, deposits with the operator or Mortgagee, where Mortgagor
is a non-operator, or with Mortgagee, where Mortgagor is an operator, Mortgagor&#146;s share of the
estimated cost of the proposed operation prior to electing to participate in the operation. To the
extent that Mortgagor is unable to consent to any proposed operation with respect to any of the
Mortgaged Property, prior to electing not to participate in the proposed operation, Mortgagor will
use its best efforts, to the extent practicable and to the extent allowed to do so under the
relevant operating agreement or other applicable contract, to farmout to others acceptable to
Mortgagee, on the best terms obtainable and acceptable to Mortgagee, the interest or relevant
portion of the interest of Mortgagor in the proposed operation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <U>Access to Mortgaged Property.</U> Mortgagor will permit Mortgagee and its accredited
agents, representatives, attorneys and employees, at the expense of Mortgagor, at all times to go
upon, examine, inspect, conduct environmental audits and other testing of, and remain on, the
Mortgaged Property, and to go upon the derrick floor of any well at any time drilled or being
drilled thereon, and will furnish Mortgagee, upon request, all pertinent information regarding the
development and operation of the Mortgaged Property.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <U>Waivers.</U> Mortgagor hereby expressly waives, to the full extent permitted by
applicable law, any and all rights or privileges of marshalling of assets, sale in inverse order of
alienation, notices, appraisements, redemption, and any prerequisite in the event of foreclosure of
the Liens created herein. Mortgagee at all times shall have the right to release any part of the
Mortgaged Property now or hereafter subject to the Liens of this Deed of Trust, any part of the
proceeds of production or other income herein or hereafter assigned or pledged, or any other
security it now has or may hereafter have securing the Indebtedness, without releasing any other
part of the Mortgaged Property, proceeds, or income, and without affecting the Liens hereof as to
the part or parts of the Mortgaged Property, proceeds, or income not so released or the right to
receive future proceeds and income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <U>Compliance with Laws.</U> Mortgagor will comply with all Requirements of Law
applicable to the Mortgaged Property and the operations conducted thereon, including, without
limitation, the Natural Gas Policy Act of 1978, as amended, and Environmental Laws; and cause all
employees, crew members, agents, contractors, sub-contractors, and future lessees (pursuant to
appropriate lease provisions) of Mortgagor, while such Persons are acting within the scope of their
relationship with Mortgagor, to comply with all such Requirements of Law as may be necessary or
appropriate to enable Mortgagor to so comply.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <U>Hazardous Substances Indemnification.</U> <FONT style="font-variant: SMALL-CAPS"><B>Mortgagor hereby indemnifies and
holds mortgagee and the lenders and their respective shareholders, officers, directors, employees,
agents, attorneys-in-fact, and affiliates and the trustee harmless from and against any and all
claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial
proceedings and orders, judgments, remedial actions, requirements and enforcement actions of any
kind, and all costs and expenses incurred in connection therewith (including, without limitation,
attorneys&#146; fees and expenses), arising directly or indirectly, in whole or in part, from (a)&nbsp;the
presence of any hazardous substances on, under, or from any mortgaged property, whether prior to or
during the term hereof, (b)&nbsp;any activity carried on or undertaken on or off any mortgaged property,
whether prior to or during the term hereof, and whether by mortgagor or any predecessor in title,
employee, agent, contractor, or subcontractor of mortgagor or any other person at any time
occupying or present on any mortgaged property, in connection with the handling, treatment,
removal, storage, decontamination, cleanup, transportation, or disposal of any hazardous
substances at any time located or present on or under such property, (c)&nbsp;any residual contamination
on or under any mortgaged property, (d)&nbsp;any contamination of any mortgaged property or natural
resources arising in connection with the generation, use, handling, storage, transportation, or
disposal of any hazardous substance by mortgagor or any employee, agent, contractor, or
subcontractor of mortgagor while such persons are acting within the scope of their relationship
with mortgagor, irrespective of whether any of such activities were or will be undertaken in
accordance with applicable requirements of law, or (e)&nbsp;the performance and enforcement of this deed
of trust or any other act or omission in connection with or related to this deed of trust or the
transactions contemplated hereby, including, without limitation, any of the foregoing in this
section arising from negligence, whether sole or concurrent, on the part of mortgagee or any lender
or any of their respective shareholders, officers, directors, employees, agents, attorneys-in-fact,
or affiliates or the trustee; with the foregoing indemnity surviving satisfaction of the
indebtedness, the termination of the credit agreement, and the release of the liens created
hereby.</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <U>Site Assessments.</U> Mortgagee (by its officers, employees and agents) at any
time and from time to time, either prior to or after the occurrence of an Event of Default, may
contract, at the expense of Mortgagor, for the services of Persons (the &#147;<U>Site Reviewers</U>&#148;) to
perform environmental site assessments and other tests (&#147;<U>Site Assessments</U>&#148;) on all or any portion
of the Mortgaged Property for the purpose of determining whether any environmental condition exists
on any Mortgaged Property which could reasonably be expected to result in any liability, cost, or
expense to Mortgagee or any owner, occupier, or operator of such Mortgaged Property. The Site
Assessments may be performed at any time or times, upon reasonable notice, and under reasonable
conditions established by Mortgagor which do not impede the performance of the Site Assessments.
The Site Reviewers are hereby authorized to enter upon all or any portion of the Mortgaged Property
for such purposes. The Site Reviewers are further authorized to perform both above and below the
ground testing for environmental damage or the presence of Hazardous Substances on the Mortgaged
Property and such other tests on the Mortgaged Property as may be necessary to conduct the Site
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assessments in the reasonable opinion of the Site Reviewers. Mortgagor will supply to the Site
Reviewers such historical and operational information regarding the Mortgaged Property as may be
reasonably requested by the Site Reviewers to facilitate the Site Assessments and will make
available for meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. On request, Mortgagee shall make the results of such Site Assessments available to
Mortgagor, which, prior to an Event of Default, may at its election participate under reasonable
procedures in the direction of such Site Assessments and the description of tasks of the Site
Reviewers. The cost of performing all Site Assessments shall be paid by Mortgagor upon demand of
Mortgagee and any such obligations shall be Indebtedness secured by this Deed of Trust.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11 <U>Uneconomic Wells.</U> Should proceeds from the sale of production from any oil and/or
gas well constituting part of the Mortgaged Property (net of production, severance and windfall
profit taxes and royalties, overriding royalties and other payments out of or measured by
production) not exceed the expense of operation of such well (including, but not limited to,
operator&#146;s overhead, payments to contractors and suppliers, and annual taxes assessed on the basis
of the value of the Property prorated on a monthly basis, but expressly excluding any portion of
the cost of drilling or completing the relevant well or the cost of non-routine workover or
remedial operations) for a period in excess of three consecutive calendar months, then, upon
receipt by Mortgagor of written notification from Mortgagee, Mortgagor will (a)&nbsp;take all necessary
steps to abandon the relevant well, or (b)&nbsp;provide from sources other than proceeds from the sale
of production attributable to the Mortgaged Property <I>(i.e., </I>through borrowings or contractual
commitments obtained from third parties not in violation of any provision of this Deed of Trust or
any other Loan Document) the funds required to pay the share of Mortgagor of the expenses
associated with the continuing operation of such well.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12 <U>Performance of Gas Contracts.</U> Mortgagor will perform and observe in all material
respects all of its obligations under each contract relating to the sale of gas produced from or
attributable to the Mortgaged Property and will not, except in good faith and as the result of
arm&#146;s length negotiations and with prior written notice to Mortgagee, change, modify, amend or
waive any of the terms or provisions of any such contract or take any other action which would
release any other party from its obligations or liabilities under any such contract.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13 <U>Covenants Running with the Land.</U> All covenants and agreements herein contained
shall constitute covenants running with the Land.
</DIV>



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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 5</U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>DEFEASANCE, FORECLOSURE</U><BR>
<U>AND OTHER REMEDIES</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <U>Defeasance.</U> Should the Indebtedness be paid, then the conveyance of the Mortgaged
Property shall become of no further force and effect, and, at the request and expense of Mortgagor,
the Lien granted hereunder shall be released, without recourse or warranty; otherwise, it shall
remain in full force and effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <U>Events of Default.</U> The occurrence of any Event of Default under the Credit
Agreement shall constitute an Event of Default under this Deed of Trust.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 <U>Acceleration and Exercise of Power of Sale.</U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the occurrence of an Event of Default specified in Sections&nbsp;7.1(f) or
7.1(g) of the Credit Agreement, the aggregate principal amount of all Indebtedness then
outstanding and all interest accrued thereon shall automatically become immediately due
and payable, without presentment, demand, protest, notice of protest, default or
dishonor, notice of intent to accelerate maturity, notice of acceleration of maturity,
or other notice of any kind, all of which are hereby expressly waived by Mortgagor to
the full extent permitted by applicable law. Upon the occurrence of any other Event
of Default, Mortgagee may declare the aggregate principal amount of all Indebtedness
then outstanding and all interest accrued thereon immediately due and payable,
whereupon the same shall become immediately due and payable without presentment,
demand, protest, notice of protest, default or dishonor, notice of intent to accelerate
maturity, notice of acceleration of maturity, or other notice of any kind, all of which
are hereby expressly waived by Mortgagor to the full extent permitted by applicable
law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon the occurrence of any Event of Default or at any time thereafter while
the Indebtedness or any part thereof remains unpaid, it shall be the duty of the
Trustee, on request of Mortgagee (which request is hereby presumed), to enforce this
Trust and, after advertising the time and place of the sale for at least 21&nbsp;days prior
to the day of sale, by posting or causing to be posted a written or printed notice
thereof at the courthouse door and by filing a copy of such notice in the office of the
county clerk of each county in which the Mortgaged Property or any part thereof may be
situated, and serving written notice of the proposed sale on each debtor obligated to
pay the Indebtedness according to the records of Mortgagee, by postage prepaid,
certified United States mail, at the most recent address for such debtor as shown by
the records of Mortgagee, at least 21&nbsp;days prior to the day of sale, to sell the
Mortgaged Property, either as a whole or in parcels, as the Trustee may deem proper, at
public venue at the courthouse of the county in which the Mortgaged Property or any
part thereof may be situated (and being the county designated in the notice of sale) on
the first Tuesday of any month between the hours of 10:00&nbsp;a.m. and 4:00 p.m., to the
highest bidder for cash, and after such sale to execute and deliver to the purchaser or
purchasers good and sufficient deeds and assignments, conveying
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">such Property so sold to the purchaser or purchasers with general warranty of title
made on behalf of Mortgagor. The Trustee, or his successor or substitute, is hereby
authorized and empowered to appoint any one or more Persons as his
attorneys-in-fact
or agents to act as Trustee under him and in his name, place and stead, such
appointment to be evidenced by a written instrument executed by the Trustee, or his
successor or substitute, to perform any one or more act or acts necessary or
incident to any sale under the power of sale hereunder, including, without
limitation, the posting and filing of any notices, the conduct of the sale and the
execution and delivery of any instruments conveying the Mortgaged Property as a
result of the sale, but in the name and on behalf of the Trustee, or his successor
or substitute; and all acts done or performed by such attorneys-in-fact or agents
shall be valid, lawful and binding as if done or performed by the Trustee, or his
successor or substitute. No single sale or series of sales by the Trustee shall
extinguish the Lien or exhaust the power of sale hereunder except with respect to
the items of Property sold, but such Lien and power shall exist for so long as and
may be exercised in any manner by law or as herein provided as often as the
circumstances require to give Mortgagee full relief hereunder. The purchaser at any
such sale shall not assume, nor shall the heirs, legal representatives, successors
or assigns of such purchaser, be deemed to have assumed, by reason of the
acquisition of Property or rights mortgaged hereunder, any liability or obligation
of any lessee or operator of the Mortgaged Property, or any part thereof, arising by
reason of any occurrence taking place prior to such sale. It shall not be necessary
to have present, or to exhibit at any such sale, any of the personal Property
subject to the Lien hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 <U>Rights as Secured Party.</U> Upon the occurrence of any Event of Default, Mortgagee
shall be entitled to all of the rights, powers, and remedies afforded a secured party by the UCC
with respect to the personal Property and fixtures and as-extracted collateral in which Mortgagee
has been granted a security interest hereby, or Mortgagee may proceed in accordance with the
provisions hereof as to both the real and personal Property covered hereby.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 <U>Application of Proceeds of Sale.</U> The Trustee is authorized to receive the proceeds
of each sale of Mortgaged Property and apply the same as follows:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>FIRST:</U> to the payment of all necessary costs and expenses
incident to the execution of this Deed of Trust, including, but not
limited to, a fee to the Trustee of 5% of the amount realized at the
sale, if required by the Trustee;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>SECOND:</U> to any and all Indebtedness then hereby secured,
application to be made in such order and in such manner as Mortgagee
may, in its discretion, elect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U>THIRD:</U> the balance, if any, to Mortgagor or its successors
or assigns, or other Person legally entitled thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 <U>Substitute Trustee.</U> In the event of the death of the Trustee, or his removal from
the State of Texas, or his failure, refusal, or inability for any reason to make any such sale or
to
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">perform any of the trusts herein declared, or at any time, whether with or without cause,
Mortgagee may appoint, in writing, a substitute trustee who shall thereupon succeed to all the
estates, rights, powers, and trusts herein granted to and vested in the Trustee. In the same
events as first above stated, and in the same manner, successive substitute Trustees may
thereafter be appointed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <U>Statements by Trustee.</U> It is agreed that in any deed or deeds given by any Trustee
any and all statements of fact or other recitals therein made as to the identity of the holder or
holders of the Indebtedness, or as to default in the payments thereof or any part thereof, or as to
the breach of any covenants herein contained, or as to the request to sell, notice of sale, time,
place, terms and manner of sale, and receipt, application, and distribution of the money realized
therefrom, or as to the due and proper appointment of a substitute trustee, and, without being
limited by the foregoing, as to any other or additional act or thing having been done by Mortgagee
or the Trustee, shall be taken by all courts of law and equity as prima facie evidence that the
statements or recitals state facts and are without further question to be so accepted. Mortgagor
does hereby ratify and confirm any and all acts that the Trustee may lawfully do in the premises by
virtue of the terms and conditions of this Deed of Trust.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 <U>Suit to Collect and Foreclose.</U> Mortgagee, at its election, or the Trustee, upon
written request of Mortgagee, may proceed by suit or suits, at law or in equity, to enforce the
payment of the Indebtedness in accordance with the terms hereof and of the notes, guaranties, or
other documents evidencing it, and to foreclose the Lien of this Deed of Trust as against all or
any portion of the Mortgaged Property and to have such Property sold under the judgment or decree
of a court of competent jurisdiction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9 <U>Mortgagee or Trustee as Purchaser.</U> Mortgagee or the Trustee may be a purchaser
of all or any portion of the Mortgaged Property at any sale thereof, whether such sale be under the
power of sale hereinabove vested in the Trustee, upon any other foreclosure of the Lien hereof, or
otherwise. Mortgagee or the Trustee so purchasing shall, upon any such purchase, acquire title to
the Mortgaged Property so purchased, free of the Lien of this Deed of Trust and free of all rights
of redemption in Mortgagor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10 <U>Entry and Operation.</U> Upon the occurrence of any Event of Default, then in each
and every such case and in addition to the other rights and remedies hereunder, the Trustee or
Mortgagee, whether or not the Indebtedness shall have become due and payable, may, but shall not be
obligated to, enter into and upon and take possession of all or any portion of the Mortgaged
Property and may exclude Mortgagor, its agents and servants wholly therefrom and have, hold, use,
operate, manage, and control all or any portion of the Mortgaged Property and produce the oil, gas,
and other minerals therefrom and market the same, all at the sole risk and expense of Mortgagor and
at the expense of the Mortgaged Property, applying the net proceeds so derived, first, to the cost
of maintenance and operation of such Mortgaged Property; second, to the payment of the
Indebtedness, application to be made first to interest and then to principal; and the balance
thereof, if any, shall be paid to Mortgagor. Upon such payment of all such costs and Indebtedness,
the Mortgaged Property shall be returned to Mortgagor in its then condition, and neither the
Trustee nor Mortgagee shall be liable to Mortgagor for any damage or injury to the Mortgaged
Property except such as may be caused through the fraud or willful misconduct of the Trustee or
Mortgagee, as the case may be.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11 <U>Power of Attorney to Mortgagee.</U> Mortgagor does hereby designate Mortgagee as
the agent of Mortgagor to act in the name, place, and stead of Mortgagor in the exercise of each
and every remedy set forth herein and in conducting any and all operations and taking any and all
action reasonably necessary to do so, recognizing such agency in favor of Mortgagee to be coupled
with the interests of Mortgagee under this Deed of Trust and, thus, irrevocable so long as this
Deed of Trust is in force and effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12 <U>Remedies Cumulative and Non-Exclusive.</U> The rights of entry, sale, or suit, as
hereinabove or hereinafter conferred, are cumulative of all other rights and remedies herein or by
law or in equity provided, and shall not be deemed to deprive Mortgagee or the Trustee of any such
other legal or equitable rights or remedies, by judicial proceedings or otherwise, appropriate to
enforce the conditions, covenants, and terms of this Deed of Trust and the other Loan Documents.
The employment of any remedy hereunder or otherwise shall not prevent the concurrent or subsequent
employment of any other appropriate remedy or remedies.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 6</U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>ASSIGNMENT OF PRODUCTION</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Assignment.</U> In addition to the conveyance to the Trustee herein made, Mortgagor
does hereby transfer, assign, deliver and convey unto Mortgagee, its successors and assigns, all of
the oil, gas, and other minerals produced, saved, or sold from the Mortgaged Property and
attributable to the interests of Mortgagor therein subsequent to 7:00 a.m. on the first day of the
month in which this Deed of Trust is executed, together with the proceeds of any sale thereof.
Mortgagor hereby directs any purchaser now or hereafter taking any production from the Mortgaged
Property to pay to Mortgagee such proceeds derived from the sale thereof and to continue to make
payments directly to Mortgagee until notified in writing by Mortgagee to discontinue the same. The
purchaser of any such production shall not be required to see to the application of the proceeds
thereof by Mortgagee, and payment made to Mortgagee shall be binding and conclusive as between such
purchaser and Mortgagor. Mortgagor further agrees to perform all such acts and to execute all such
further assignments, transfer and division orders, and other instruments as maybe required or
desired by Mortgagee or any other party to have such proceeds and revenues so paid to Mortgagee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Postponement of Payment.</U> For its convenience, Mortgagee has elected not to
exercise immediately its right to receive payment to it directly of the proceeds of any sale of the
oil, gas and other minerals produced or sold from the Mortgaged Property and the purchasers may
continue to make such payment or delivery of the proceeds to Mortgagor until such time as Mortgagor
and the purchasers have received notice that an Event of Default has occurred and is continuing,
and that the purchasers are directed to make payment or delivery of the proceeds directly to
Mortgagee. Such failure by Mortgagee to exercise its rights immediately shall not in any way waive
the right of Mortgagee to receive any of the proceeds, or to make any such demand, or to affect any
such assignment as to any proceeds not theretofore paid or delivered to Mortgagor. In this regard,
if any of the proceeds are paid or delivered directly to Mortgagee and then, at the request of
Mortgagee, the proceeds are, for a period or periods of time, paid or delivered to Mortgagor,
Mortgagee shall nevertheless have the right, effective upon written notice, to require that future
proceeds be again paid or delivered directly to it. Mortgagee shall never be required to send any
such
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">notice to all purchasers, and may direct such notice only to those purchasers as it may, in its
discretion, desire. It shall never be necessary for Mortgagee to institute legal proceedings to
enforce the assignment of hydrocarbons, proceeds, or other rents, profits, or income contained in
this instrument. It shall not be necessary for Mortgagee to obtain possession of the Mortgaged
Property as a prerequisite to Mortgagee&#146;s right to collect or receive any hydrocarbons, other
minerals, proceeds, or other rents, profits, or income assigned to Mortgagee under this
instrument. Mortgagor and Mortgagee expressly agree and it is the express intention of Mortgagor
and Mortgagee that in no event will any reduction in the obligations be measured by the fair
market value of the hydrocarbons, other minerals, proceeds, or other rents, profits, or income
assigned to Mortgagee under this instrument.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3 <U>Change of Purchaser.</U> Should any purchaser taking the production from the Mortgaged
Property fail to make prompt payment to Mortgagee in accordance with the provisions of Section&nbsp;6.1,
Mortgagee shall have the right, at the expense of Mortgagor, to demand a change of connection and
to designate another purchaser with whom a new connection may be made, without any liability on the
part of Mortgagee in making such selection, so long as ordinary care is used in the making thereof.
Promptly upon such demand, Mortgagor shall take all necessary and appropriate action to effect such
change of connection.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4 <U>Application of Proceeds.</U> Mortgagor authorizes and empowers Mortgagee to receive,
hold, and collect all sums of money paid to Mortgagee in accordance with the provisions of Section
6.1, and to apply the same as hereinafter provided, all without any liability or responsibility on
the part of Mortgagee, save and except as to good faith in so receiving and applying such sums.
Mortgagee may apply all sums received by Mortgagee pursuant to Section&nbsp;6.1 to the payment of the
Indebtedness, application to be made in such manner as Mortgagee may elect, regardless of whether
the application so made shall exceed the payments of principal and interest then due as provided in
the Loan Documents. After such application has been so made by Mortgagee, the balance of any such
sums shall be paid to Mortgagor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5 <U>No Postponement of Installments on Indebtedness.</U> It is understood and agreed
that should such payments provided for by Section&nbsp;6.1 be less than the sum or sums then due on the
Indebtedness, such sum or sums then due shall nevertheless be paid by Mortgagor in accordance with
the provisions of the Loan Documents, and neither the assignment made pursuant to Section&nbsp;6.1 nor
any other provisions hereof shall in any manner be construed to affect the terms and provisions of
the Loan Documents. Likewise, neither the assignment made pursuant to Section&nbsp;6.1 nor any other
provisions hereof shall in any manner be construed to affect the Liens, rights, title, and remedies
herein granted securing the Indebtedness or the liability of Mortgagor therefor. The rights under
this Article&nbsp;VI are cumulative of all other rights, remedies, and powers granted under this Deed of
Trust and are cumulative of any other security which Mortgagee now holds or may hereafter hold to
secure the payment of the Indebtedness.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6 <U>Turnover to Mortgagee.</U> Should Mortgagor receive any of the proceeds of any sale of
oil, gas, or other minerals produced, saved, or sold from the Mortgaged Property, which under the
terms hereof should have been remitted to Mortgagee, Mortgagor will immediately remit same in full
to Mortgagee.
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7 <U>Release of Proceeds Upon Payment of Indebtedness.</U> Upon payment in full of all Indebtedness
and the termination of the Commitment, the remainder of such proceeds held by Mortgagee, if any,
shall be paid over to Mortgagor upon demand, and a release of the interest hereby assigned will be
made, without recourse or warranty, by Mortgagee to Mortgagor at its request and its expense.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8 <U>Duty of Mortgagee.</U> Mortgagee shall not be liable for any failure to collect, or
for any failure to exercise diligence in collecting, any funds assigned hereunder. Mortgagee shall
be accountable only for funds actually received.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9 <U>Power of Attorney to Mortgagee.</U> Mortgagor does hereby designate Mortgagee as
the agent of Mortgagor to act in the name, place, and stead of Mortgagor for the purpose of taking
any and all actions deemed by Mortgagee necessary for the realization by Mortgagee of the benefits
of the assignment of production provided herein, recognizing such agency in favor of Mortgagee to
be coupled with the interests of Mortgagee under this Deed of Trust and, thus, irrevocable so long
as this Deed of Trust is in force and effect.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>ARTICLE 7 </U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U>MISCELLANEOUS</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Further Assurances.</U> Upon request of Mortgagee, Mortgagor will promptly correct any
defects, errors, or omissions in the execution or acknowledgment of this Deed of Trust or any other
Loan Document, and execute, acknowledge, and deliver such other assurances and instruments as
shall, in the opinion of Mortgagee, be necessary to fulfill the terms of this Deed of Trust.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Interest.</U> Any provision in any document that may be executed in connection
herewith to the contrary notwithstanding, Mortgagee shall in no event be entitled to receive or
collect, nor shall any amounts received hereunder be credited so that Mortgagee shall be paid, as
interest a sum greater than that authorized by law. If any possible construction of this Deed of
Trust or any Loan Document seems to indicate any possibility of a different power given to
Mortgagee or any authority to ask for, demand, or receive any larger rate of interest, this clause
shall override and control, and proper adjustments shall be made accordingly.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Agreement as Entirety.</U> This Deed of Trust, for convenience only, has been divided
into Articles, Sections, and subsections. The rights, powers, privileges, duties, and other legal
relations of Mortgagor, the Trustee, and Mortgagee shall be determined from this Deed of Trust as
an entirety and without regard to the aforesaid division into Articles, Sections, and subsections
and without regard to headings affixed to such Articles, Sections, or subsections.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Number and Gender.</U> Whenever the context requires, reference herein made to the
single number shall be understood to include the plural, and the plural shall likewise be
understood to include the singular. Words denoting sex shall be construed to include the masculine,
feminine, and neuter when such construction is appropriate; and specific enumeration shall not
exclude the general, but shall be construed as cumulative.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Rights and Remedies Cumulative.</U> All rights, powers, immunities, remedies, and
Liens of Mortgagee existing and to exist hereunder or under any other instruments or at law or in
equity and all other or additional security shall be cumulative and not exclusive, each of the
other. Mortgagee shall, in addition to the rights and remedies herein expressly provided, be
entitled to such other remedies as may now or hereafter exist at law or in equity for securing and
collecting the Indebtedness, for enforcing the covenants herein, and for foreclosing the Liens
hereof. Resort by Mortgagee to any right or remedy provided for hereunder or at law or in equity
shall not prevent concurrent or subsequent resort to the same or any other right or remedy. No
security heretofore, herewith, or subsequently taken by Mortgagee shall in any manner impair or
affect the security given by this Deed of Trust or any security by endorsement or otherwise
presently or previously given; and all security shall be taken, considered, and held as cumulative.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6 <U>Parties in Interest.</U> This Deed of Trust shall be binding upon the parties and
their respective heirs, administrators, legal representatives, successors, and assigns and shall
inure to the benefit of the Mortgagee and its legal representatives, successors, and assigns. The
terms used to designate any of the parties herein shall be deemed to include the heirs,
administrators, legal representatives, successors, and assigns of such parties. The term
&#147;Mortgagee&#148; shall also include any lawful owner, holder, or pledgee of any Indebtedness.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7 <U>Supplements.</U> Without in any manner limiting the effect of Section&nbsp;1.4 or any other
provisions of this Deed of Trust as to the binding effect of this Deed of Trust on after-acquired
rights of Mortgagor, it is contemplated by the parties hereto that from time to time additional
interests and properties may or will be added to the interests and properties subject to the Liens,
rights, titles, and interests created by this Deed of Trust by means of supplemental indentures
identifying this Deed of Trust and describing such interests and properties to be so added and
included. Upon the execution of any such supplemental indenture, the Liens, rights, titles, and
interests created herein shall immediately attach to and be effective with respect to any such
interests and properties so described, the same as if such interests and properties had been
specifically described herein, and such interests and properties being included in the term
&#147;Mortgaged Property,&#148; as used herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8 <U>Invalidity.</U> In the event that any one or more of the provisions contained in this
Deed of Trust shall for any reason be held invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision of this Deed of
Trust or any other Loan Document.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9 <U>Construction.</U> All titles or headings to Articles, Sections, subsections, or other
divisions of this Deed of Trust or the exhibits hereto are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the other content of such
Articles, Sections, subsections, or other divisions, such other content being controlling as to the
agreement among the parties hereto. Article, Section, subsection, and Exhibit references herein are
to such Articles, Sections, subsections, and Exhibits of this Deed of Trust unless otherwise
specified.
The words &#147;hereby,&#148; &#147;herein,&#148; &#147;hereinabove,&#148; &#147;hereinafter,&#148; &#147;hereinbelow,&#148; &#147;hereof,&#148; and
&#147;hereunder&#148; when used in this Deed of Trust shall refer to this Deed of Trust as a whole and not
to any particular Article, Section, subsection, or provision of this Deed of Trust.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10 <U>Fixtures, Minerals and Accounts.</U> Without in any manner limiting the generality
of any of the foregoing hereof, some portions of the personal Property described hereinabove are or
are to become fixtures on the Lands. In addition, the security interest created hereby under
applicable provisions of the UCC attaches to minerals, including oil and gas, and accounts
resulting from the sale thereof, at the wellhead or minehead located on the Lands.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11 <U>Financing Statement Filings.</U> This Deed of Trust may be filed as provided in
Article&nbsp;9 of the UCC to assure that the security interests granted by this Deed of Trust are
perfected. In this connection, this Deed of Trust may be presented to a filing officer under the
UCC to be filed in the real estate records as a Financing Statement covering minerals and fixtures.
Further, Mortgagor authorizes Mortgagee to execute and file at any time and from time to time any
and all Financing Statements and amendments thereto in any UCC jurisdiction, pursuant to Article&nbsp;9
of the UCC, as Mortgagee deems necessary in its sole discretion, in conjunction with this Deed of
Trust, and Mortgagor expressly authorizes execution and filing of such Financing Statements by
Mortgagee without need of signature or execution by Mortgagor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12 <U>Addresses.</U> For purposes of filing this Deed of Trust as a financing statement,
the addresses for Mortgagor, as the debtor, and Mortgagee, as the secured party, are as set forth
hereinabove.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.13 <U>Counterparts.</U> For the convenience of the parties, this Deed of Trust may be
executed in multiple counterparts, each of which for all purposes shall be deemed, and may be
enforced from time to time as, a chattel mortgage, real estate mortgage, deed of trust, security
agreement, assignment or contract, or as one or more thereof. For recording purposes, various
counterparts have been executed, and there may be attached to each such counterpart an <U>Exhibit
A </U>containing only the description of the Mortgaged Property, or portions thereof, which relates
to the county or state in which the particular counterpart is to be recorded. A complete,
original counterpart of this Deed of Trust with a complete <U>Exhibit&nbsp;A</U> may be obtained from
Mortgagee. Each of the counterparts hereof so executed shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the same instrument.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.14 <U>No Waiver by Mortgagee.</U> No course of dealing on the part of Mortgagee, its
officers or employees, nor any failure or delay by Mortgagee with respect to exercising any of its
rights or remedies hereunder shall operate as a waiver thereof nor shall the exercise or partial
exercise of any such right or remedy shall preclude the exercise of any other right or remedy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.15 <U>Governing Agreement.</U> This Deed of Trust is made pursuant and subject to the terms
and provisions of the Credit Agreement. In the event of a conflict between the terms and provisions
of this Deed of Trust and those of the Credit Agreement, the terms and provisions of the Credit
Agreement shall govern and control. The inclusion in this Deed of Trust of provisions not addressed
in the Credit Agreement shall not be deemed a conflict, and all such additional provisions
contained herein shall be given full force and effect.
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Deed of Trust is executed on the date of the acknowledgment below but
effective as of the 29<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of June, 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>MORTGAGOR (DEBTOR):</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><FONT style="font-variant: SMALL-CAPS"><B>Prime Offshore </B></FONT><B>L.L.C.<BR>
(fka F-W Oil Exploration L.L.C.)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Beverly A. Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">THE STATE OF CONNECTICUT
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#167;&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#167;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">COUNTY OF FAIRFIELD
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#167;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BEFORE ME, the undersigned authority, on this day personally appeared <B>BEVERLY A. CUMMINGS,</B>
Chief Executive Officer of <B>PRIME OFFSHORE L.L.C., </B>a Delaware limited liability company, known to me
to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that
she executed the same for the purposes and consideration therein expressed, as the act and deed of
such limited liability company and in the capacity therein stated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GIVEN UNDER MY HAND AND SEAL OF OFFICE this <U>29</U> day of June, 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Joan Podlovits
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NOTARY PUBLIC in and for</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fairfield County, Connecticut</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>JOAN PODLOVITS</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B><I>NOTARY PUBLIC</I></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>MY COMMISSION EXPIRES MAY 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>



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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT A</B></U><BR>
<B>TO<BR>
MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,<BR>
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The designation &#147;<U>Working Interest</U>&#148; or &#147;<U>WI</U>&#148; when used in this Exhibit means an interest
owned in an oil, gas, and mineral lease that determines the cost-bearing percentage of the owner of
such interest. The designation &#147;<U>Net Revenue Interest</U>&#148; or &#147;<U>NRI</U>&#148; means that portion of the
production attributable to the owner of a working interest after deduction for all royalty burdens,
overriding royalty burdens or other burdens on production, except severance, production, and other
similar taxes. The designation &#147;<U>Overriding Royalty Interest</U>&#148; or &#147;<U>ORRI</U>&#148; means an interest in
production which is free of any obligation for the expense of exploration, development, and
production, bearing only its pro rata share of severance, production, and other similar taxes and,
in instances where the document creating the overriding royalty interest so provides, costs
associated with compression, dehydration, other treating or processing, or transportation of
production of oil, gas, or other minerals relating to the marketing of such production. The
designation &#147;<U>Royalty Interest</U>&#148; or &#147;<U>RJ</U>&#148; means an interest in production which results from an
ownership in the mineral fee estate or royalty estate in the relevant land and which is free of any
obligation for the expense of exploration, development, and production, bearing only its pro rata
share of severance, production, and other similar taxes and, in instances where the document
creating the royalty interest so provides, costs associated with compression, dehydration, other
treating or processing or transportation of production of oil, gas, or other minerals relating to
the marketing of such production.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any reference in this Exhibit to wells or units is for warranty of interest, administrative
convenience, and identification and shall not limit or restrict the right, title, interest, or
properties covered by this Deed of Trust. All right, title, and interest of Mortgagor in the
properties described herein are and shall be subject to this Deed of Trust, regardless of the
presence of any units or wells not described herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The references to book or volume and page herein refer to the recording location of each
respective Mortgaged Property described herein in the county where the land covered by the
Mortgaged.
</DIV>


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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>OIL, GAS AND MINERAL INTERESTS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>South Padre Island 1113</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Oil and Gas Lease OCS-G-24302, granted by the United States of America to F-W Oil Exploration
L.L.C., dated effective November&nbsp;1, 2002, covering all of Block 1113, South Padre Island Area, OCS
Leasing Map, Texas Map No.&nbsp;1, offshore Cameron County, Texas.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.0000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenue Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.2500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U> <B>South Padre Island 1133</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Oil and Gas Lease OCS-G-26431, granted by the United States of America to F-W Oil Exploration
L.L.C., dated effective November&nbsp;1, 2004, covering all of Block 1133, South Padre Island Area, OCS
Leasing Map, Texas Map No.&nbsp;1, offshore Cameron County, Texas.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.0000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Revenue Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.2500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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<DOCUMENT>
<TYPE>EX-10.27.2
<SEQUENCE>17
<FILENAME>d44173exv10w27w2.htm
<DESCRIPTION>PLEDGE AGREEMENT
<TEXT>
<HTML>
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<TITLE>exv10w27w2</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 10.27.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PLEDGE AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS
PLEDGE AGREEMENT </B>(this &#147;<U>Agreement</U>&#148;), is made as of June&nbsp;29, 2006, by and between
<B>GUARANTY BANK, FSB, </B>a federal savings bank, as Agent for itself and certain other lenders (the
&#147;<U>Secured Party</U>&#148;), and <B>PRIME OFFSHORE L.L.C.,
</B>a Delaware limited liability company (&#147;<U>Pledgor</U>&#148;),
with reference to the following:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>R</U>
<U>E</U> <U>C</U> <U>I</U> <U>T</U> <U>A</U> <U>L</U> <U>S:</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Pledgor, the Secured Party, and the Lenders described therein, have entered into that
certain Credit Agreement of even date herewith (such agreement, as the same may be amended or
modified from time to time, being hereinafter referred to as the &#147;<U>Credit Agreement</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;Pledgor owns 100% of the general partner interest in the FWOE Partners L.P. (the
&#147;<U>Partnership</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;The Lenders have conditioned their commitments to lend under the Credit Agreement upon the
execution and delivery of this Agreement by the Pledgor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Terms used herein but not otherwise defined herein shall have the meanings ascribed to them
in the Credit Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>A</U> <U>G</U> <U>R</U> <U>E</U> <U>E</U> <U>M</U> <U>E</U> <U>N</U> <U>T</U> <U>S:</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations,
warranties and agreements contained herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Pledgor hereby agrees with Secured Party for the
benefit of the Lenders as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1. <U>Grant of Pledge Interest.</U> As security for the obligations specified in
Section&nbsp;2 hereof, Pledgor hereby grants to Secured Party a continuing security interest in all of
its right, title and interest in and to the following described property, all of which is
hereinafter collectively referred to as the &#147;<U>Collateral</U>&#148;:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
<U>Partnership Interests.</U> Pledgor&#146;s entire general partner interest in the
Partnership, which currently consists of 100% of the general partnership interest in the
Partnership. Without limiting the generality of the foregoing, Secured Party is hereby
granted a security interest in all of Pledgor&#146;s right, title and interest arising under that
certain Amended and Restated Agreement of Limited Partnership dated August&nbsp;22, 2005 (the
&#147;<U>Partnership Agreement</U>&#148;) including, without limitation, all rights of Pledgor to receive any
and all monies, properties, payments and distributions thereunder, whether in respect of
operating profits, sales, exchanges, condemnations or insured losses of any of Partnership&#146;s
assets, the liquidation of any of Partnership&#146;s assets and affairs, guaranteed payments,
reimbursement of expenses, or otherwise (collectively the &#147;<U>Distributions</U>&#148;); all rights,
powers and prerogatives of Pledgor arising under the Partnership Agreement or under law
relating to the general partnership interest of Pledgor, including, without limitation, all
rights of Pledgor, if any, to control and manage the business of the Partnership and to vote
on any matter specified therein or under law; all rights of Pledgor to cause an assignee to
be
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">substituted in the Partnership as a partner in the place and stead of Pledgor; all
rights and claims of Pledgor for damages arising out of or for breach of or default under
the Partnership Agreement; all rights of Pledgor to access to the books and records of the
Partnership and to other information concerning or affecting the Partnership and all rights
of Pledgor to terminate the Partnership Agreement, if any, to perform thereunder, to compel
performance and otherwise to exercise all remedies thereunder; in each of the foregoing
cases, whether such rights, interests and assets are now owned or hereafter acquired and
including all of Pledgor&#146;s interest in any partnership or other entity which is a successor
to or continuation of either Partnership.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Proceeds, Substitutions, Etc.</U> To the extent not included in the items of
Collateral set forth in paragraph (a)&nbsp;above, any and all proceeds, products, increases,
substitutions, replacements, repairs, additions and accessions to or of such items of
Collateral, including, without limitation, all insurance and the proceeds thereof, all
condemnation proceeds or the proceeds of any other form of taking thereof and all real
property, equipment, inventory, accounts, general intangibles, contract rights, documents,
instruments, chattel paper, money, deposit accounts and other tangible or intangible
property received upon the sale or disposition of any of the foregoing now existing or
hereafter arising.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to each particular item of Collateral, the security interest herein
granted shall attach immediately upon Pledgor&#146;s execution hereof or as soon as Pledgor
acquires rights in and to such item of Collateral, whichever is later. Nothing in this
Agreement shall be deemed to constitute an assumption by Secured Party of any liability or
obligation of Pledgor with respect to any of the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2. <U>Pledge for Obligations.</U> This Agreement secures and the Collateral is
security for the prompt payment or performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. &#167; 362(a)) of
(a)&nbsp;all Indebtedness now or hereafter existing, whether for principal or interest (including,
without limitation, interest which, but for the filing of a petition in bankruptcy with respect to
the Partnership, would accrue on such obligations), or payments of fees, expenses or otherwise, and
(b)&nbsp;all obligations, indebtedness and liabilities of Pledgor or the Partnership now or hereafter
existing under this Agreement or any Loan Document (all such obligations, indebtedness and
liabilities referred to in (a)&nbsp;and (b)&nbsp;of this Section being the &#147;<U>Secured Obligations</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3. <U>Assignment of Partnership Interest.</U> Concurrently herewith Pledgor shall
execute and deliver to Secured Party a fully executed Assignment of Partnership Interest in the
form attached hereto as <U>Exhibit &#147;<U>A</U>&#148;</U> with respect to the Partnership. Pledgor hereby
authorizes Secured Party, after the occurrence of an Event of Default, after the expiration of any
applicable cure period therefor and upon the completion of a sale conducted pursuant to Article&nbsp;9
of the Uniform Commercial Code (the &#147;<U>Code</U>&#148;) in effect in the State of Texas at that time, to
complete the Assignment of Partnership Interest, and if the assignee is not the Secured Party to
fill in the name of the purchaser of the Collateral at a sale conducted pursuant to Article&nbsp;9 of
the Code as the assignee, and the date on which such sale was conducted, and, thereafter, to
deliver one fully executed original to the other partners of the Partnership. Pledgor agrees that
the Partnership and its constituent
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">partners shall be entitled to rely conclusively on such Assignment of Partnership Interest and
shall have no liability to Pledgor for any loss or damage which Pledgor may incur by reason of
said reliance, this provision being expressly for the benefit of such partners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4. <U>Pledgor Remains Liable.</U> Anything herein to the contrary notwithstanding,
unless and until an Event of Default shall have occurred and the Collateral is sold at a
foreclosure sale, Pledgor shall remain liable under the Partnership Agreement to perform all of
Pledgor&#146;s obligations thereunder to the same extent as if this Agreement had not been executed,
and the exercise by Secured Party of any of its rights hereunder shall not release Pledgor from
any of Pledgor&#146;s obligations under the Partnership Agreement except as expressly otherwise
provided by law. Unless and until the Collateral is sold to Secured Party at a foreclosure sale,
neither Secured Party nor any Lender shall have any obligation or liability under the Partnership
Agreement by reason of this Agreement, nor shall Secured Party nor any Lender be obligated to
perform any of the obligations of Pledgor thereunder or to take any action to collect or to
enforce any claim for payment assigned hereunder. From and after the date the Collateral is sold
at a foreclosure sale, the purchaser thereof shall be bound by all applicable provisions of the
Partnership Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5. <U>Representations and Warranties.</U> Pledgor hereby represents and warrants to
Secured Party on behalf of the Lenders that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Pledgor is duly organized, existing and in good standing in its jurisdiction of
organization and has full power and authority to make and deliver this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The execution, delivery and performance of this Agreement by the Pledgor have been
duly authorized by all necessary organizational action and do not and will not violate the
provisions of, or constitute a default under, any presently applicable law or its
organizational documents or any agreement presently binding on it.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) This Agreement has been duly executed and delivered by the authorized officers,
partners, managers or members, as the case may be, of Pledgor and constitutes its lawful,
binding and legally enforceable obligation, subject, as to enforcement, only to bankruptcy,
insolvency, reorganization, moratorium or similar laws then in effect affecting the rights
of creditors generally and general equitable principles.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The authorization, execution, delivery and performance of this Agreement does not
require notification to, registration with, or consent or approval by, any federal, state or
local regulatory body or administrative agency.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Pledgor&#146;s rights to the Distributions are valid, enforceable under the Partnership
Agreement in accordance with its terms and are not subject to any defense, offset,
counterclaim or contingency whatsoever, except as provided in the Partnership Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Except for the security interest granted herein, Pledgor has, and will at all times
during the term hereof have, valid title to all and every part of the Collateral, free and
clear of any lien or security interest.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Upon the execution and delivery of this Agreement by Pledgor and the filing of
appropriate financing statements with the appropriate governmental agencies or, as
applicable, upon Secured Party&#146;s taking possession of the Collateral, Secured Party shall
have a perfected security interest in and to the Collateral having first priority for the
full amount of all of the Secured Obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Neither the execution and delivery of this Agreement by Pledgor nor the lawful
exercise by Secured Party of any of its rights and remedies hereunder, whether upon default
or otherwise, will result in a breach of or constitute a default under the Partnership
Agreement or any other agreement or instrument to which Pledgor is a party or by which any
of the Collateral is bound, nor violate any law or any rule or regulation of any
administrative agency or any order, writ, injunction or decree of any court or
administrative agency binding upon Pledgor, nor does any of the foregoing require the
consent of any person, entity or governmental agency or any notice or filing with any
governmental or regulatory body (except as may be required in connection with any sale or
disposition of the Collateral by laws affecting the offering and sale of securities
generally).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) There is no action nor legal, administrative or other proceeding pending or, to
the best of Pledgor&#146;s knowledge, threatened which affects Pledgor&#146;s title to the Collateral
or Pledgor&#146;s grant of a security interest hereunder, nor does Pledgor know of any basis for
the assertion of any such claim.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) The place where Pledgor keeps its books and records concerning the Collateral and
a true, complete and conformed copy of each Partnership Agreement is and will remain 9821
Katy Freeway, Suite&nbsp;1050, Houston, Texas 77024, or at such other address as Pledgor may
designate in writing to Secured Party. None of the Collateral is evidenced by a promissory
note or other instrument.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Any and all information heretofore furnished to Secured Party by Pledgor in
connection with the financial condition, assets, liabilities, business or prospects of the
Partnership or the value or condition of the Collateral is true and correct in all material
respects when furnished, and all such information hereafter furnished to Secured Party by
Pledgor will be true and correct in all material respects when furnished.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6. <U>Further Assurances.</U> Pledgor agrees at any time and from time to time, at
the expense of Pledgor, promptly to execute and to deliver all further instruments and documents,
and to take all further action, that may be necessary as reasonably requested by Secured Party in
order to perfect and to protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and to enforce its rights and remedies hereunder with respect
to any of the Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7. <U>Affirmative and Negative Covenants.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Pledgor shall not (i)&nbsp;sell, assign, transfer, exchange, lease, lend or dispose of
(directly, indirectly, or voluntarily), or grant any option with respect to, any of the
Collateral, or (ii)&nbsp;create or permit to exist any security interest or lien in or with
respect to the Collateral, except for the security interest in favor of Secured Party. The
inclusion of &#147;proceeds&#148; as a
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">component of the Collateral shall not be deemed a consent by Secured Party or the Lenders
to any sale, assignment, transfer, exchange, lease, loan, granting of an option with respect to or
disposition of all or any part of the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Pledgor shall not take any action in Pledgor&#146;s capacity as general partner of the
Partnership to (i)&nbsp;cause or permit the Partnership Agreement to be amended or terminated; (ii)
waive, postpone or modify Pledgor&#146;s rights to receive any Distributions under the Partnership
Agreement; or (iii)&nbsp;waive any default or breach of the Partnership Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Pledgor shall, at its own expense, perform and observe all of the terms and provisions of
the Partnership Agreement to be performed or observed by Pledgor, maintain the Partnership
Agreement in full force and effect, and enforce Pledgor&#146;s fights under the Partnership Agreement in
accordance with its terms. Pledgor shall promptly deliver to Secured Party any notice of default
which Pledgor receives with respect to the Partnership Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Pledgor shall comply with all laws, statutes and regulations pertaining to its ownership
of the Collateral. Pledgor shall pay or cause to be paid all taxes and other levies with respect to
the Collateral when the same become due and payable except such as are being contested in good
faith by appropriate proceedings, where the effect of such proceedings is to stay any enforcement
in respect of such unpaid taxes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Pledgor shall promptly notify Secured Party in writing of any event which materially
adversely affects the value of the Collateral, the ability of Pledgor or Secured Party to dispose
of the Collateral or the rights and remedies of Secured Party in relation thereto, including, but
not limited to, the levy of any legal process against the Collateral and the adoption of any order,
arrangement or procedure affecting the Collateral, whether governmental or otherwise. Pledgor shall
also promptly notify Secured Party in writing of any event which adversely affects the financial
condition, assets, liabilities, business, operations or prospects of the Partnership in any
material respect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 8. <U>Rights of Pledgor with Respect to Collateral.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as no Event of Default shall have occurred and be continuing, Pledgor shall be
entitled to exercise any and all voting and other consensual and other rights pertaining to the
Collateral, or any part thereof, for any purpose not inconsistent with the terms of this Agreement
(including, without limitation, Section 7(b) hereof), the Note or any other Loan Document;
provided, however, that Pledgor shall not exercise or shall refrain from exercising any such right
if it would result in an Event of Default.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon the occurrence and during the continuance of an Event of Default:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Secured Party shall have the right to have the Collateral transferred into
the name of Secured Party pursuant to Section&nbsp;3 hereof.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) All rights of Pledgor to exercise the voting and other consensual rights
which Pledgor would otherwise be entitled to exercise pursuant to Section 8(a)
above and to receive Distributions shall cease, and all such rights shall thereupon
become vested in Secured Party, who shall thereafter upon notice to Pledgor have
the sole right to exercise such voting and other consensual rights and to receive
100&nbsp;percent of all Distributions, which shall be promptly applied by Secured Party
against the Secured Obligations in the order and manner specified in Section 12(d)
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) All Distributions which are received by Pledgor contrary to the
provisions of Section&nbsp;8(b)(ii) shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Pledgor, and forthwith shall
be paid over to Secured Party as pledged Collateral in the same form as received
(with any necessary endorsements).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9. <U>Secured Party May Perform.</U> If Pledgor fails to perform any agreement
contained herein, Secured Party may itself perform or cause the performance of such agreement, and
the expenses of Secured Party incurred in connection therewith shall be payable by Pledgor under
Section&nbsp;16. However, nothing in this Agreement shall obligate Secured Party to act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
10. <U>Secured Party Appointed Attorney-in-Fact.</U> Pledgor hereby appoints Secured
Party Pledgor&#146;s attomey-in-fact with full authority in the place and stead of Pledgor and in the
name of Pledgor or otherwise, from time to time (but only upon an Event of Default) in Secured
Party&#146;s discretion to take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including, without
limitation, to receive, endorse and collect all instruments made payable to Pledgor representing
any dividend or other Distribution in respect of the Collateral or any part thereof and to give
full discharge for the same.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11. <U>Reasonable Care.</U> Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which Secured Party accords its own
property, it being understood that Secured Party shall not have responsibility for (a)&nbsp;ascertaining
or taking action with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Secured Party has or is deemed to have knowledge
of such matters, or (b)&nbsp;taking any necessary steps to preserve rights against any parties with
respect to any Collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 12. <U>Remedies Upon Default.</U> If any Event of Default shall have occurred and be
continuing, Secured Party is, subject to the Credit Agreement, entitled to exercise any one or
more of the following remedies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Secured Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party under the Code, and Secured Party may also without notice
except as specified below sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker&#146;s board or at any of Secured Party&#146;s
offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms
as Secured Party in its sole discretion may deem commercially reasonable. Pledgor agrees
that at least
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 6 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">20&nbsp;days&#146; written notice to Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification. Secured Party shall
not be obligated to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at the time and place
to which it was so adjourned. Pledgor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale. To the extent
permitted by law, Secured Party may be the purchaser of the Collateral.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act
of 1933, as amended (the &#147;<U>Securities Act</U>&#148;), and applicable state securities laws, Secured Party may
be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to
those who will agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof Pledgor acknowledges that any
such private placement, whether through public or private sale under the Code, may be at prices and
on terms less favorable to Secured Party than those obtainable through a public offering made
pursuant to a registration statement under the Securities Act, and, notwithstanding such
circumstances, agrees that any such private placement, whether through public or private sale under
the Code, shall be deemed to have been made in a commercially reasonable manner and that Secured
Party shall have no obligation to engage in a public offering and no obligation to delay the sale
of any Collateral for the period of time necessary to permit the issuer thereof to register it for
a form of public offering requiring registration under the Securities Act or under applicable state
securities laws, even if Pledgor would agree to do so.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If Secured Party decides to exercise its right to sell any or all of the Collateral, upon
written request, Pledgor shall furnish to Secured Party all such information as Secured Party may
reasonably request in order to determine the Collateral which may be sold by Secured Party as
exempt transactions under the Securities Act and the rules of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Any cash held by Secured Party as Collateral and all cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all or any part of the
Collateral shall be promptly applied (after payment of any amounts payable to Secured Party
pursuant to Section&nbsp;16) in whole or in part by Secured Party against all or any part of the Secured
Obligations in accordance with the Credit Agreement. Any surplus of such cash or cash proceeds held
by Secured Party and remaining after payment in full of all the Secured Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Secured Party shall not be obligated to resort to its rights or remedies with respect to
any other security for or guaranty of payment of the Secured Obligations before resorting to its
rights and remedies against Pledgor hereunder. All rights and remedies of Secured Party shall be
cumulative and not in the alternative.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) To the extent the Collateral consists of Pledgor&#146;s entire interest in the
Partnership, Secured Party may pursue and enforce its rights and remedies only as to the
Distributions, reserving the discretion to pursue or not pursue its rights as to the balance
of the Collateral at a later date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) To the extent the exercise by Secured Party of any remedy afforded herein requires
the consent or approval of any governmental agency or regulatory body, the right of Secured
Party to exercise such remedy shall be conditioned upon receipt by Secured Party of such
consent or approval. In furtherance of the exercise by Secured Party of the power of sale
granted to it herein, Pledgor agrees that, upon request of Secured Party and without expense
to Secured Party, Pledgor shall use its reasonable best efforts to obtain all necessary
approvals from all applicable federal, state and local governmental agencies, authorities
and instrumentalities for the sale by Secured Party of the Collateral, or any part thereof,
or the transfer to the successful bidder or prospective purchaser of any governmental
licenses or franchise necessary to allow it to conduct the business or activities for which
the Collateral is intended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 13. <U>No Partner.</U> Notwithstanding anything to the contrary contained herein,
until such time, if any, as Secured Party or a successor thereto acquires the Collateral following
the occurrence of an Event of Default, neither Secured Party nor any Lender nor any
successor-in-interest thereof shall be deemed to be a partner in the Partnership. The security
interests granted to Secured Party herein are collateral assignments only, serving as security for
the Secured Obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 14. <FONT style="font-variant: SMALL-CAPS"><U><B>Liability and Indemnification.</B></U><B> Secured Party shall not
be liable to pledgor for any act or omission by Secured Party unless Secured Party&#146;s conduct
constitutes willful misconduct or gross negligence. Pledgor agrees to indemnify and to hold Secured
Party harmless from and against all losses, liabilities, claims, damages, reasonable costs and
expenses (including reasonable attorneys&#146; fees and disbursements) with respect to (i)&nbsp;any action
taken or any omission by Secured Party with respect to this Agreement, provided that Secured
Party&#146;s conduct does not constitute willful misconduct or
negligence, (ii)&nbsp;any claims arising out
of Pledgor&#146;s ownership of the collateral or Secured Party&#146;s security interest therein, or (iii)
Secured Party&#146;s enforcing this Agreement against Pledgor whether or not suit is filed, including,
without limitation, all reasonable costs, reasonable attorneys&#146; fees and expenses actually expended
or incurred by Secured Party in connection with, or in defense of, any insolvency, bankruptcy,
reorganization, arrangement or other similar proceeding involving pledgor which in any way affects
the exercise by Secured Party of its rights and remedies hereunder.</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 15. <U>Continuing, Security Interest: Assignment of Obligations.</U> This
Agreement shall create a continuing security interest in the Collateral and shall (a)&nbsp;remain in
full force and effect until payment in full of the Secured Obligations or the written termination
of this Agreement by Secured Party, (b)&nbsp;be binding upon Pledgor, its successors and assigns, (c)
inure, together with the rights and remedies of Secured Party hereunder, to the benefit of Secured
Party, the Lenders, and their respective successors, transferees and assigns, (d)&nbsp;constitute, along
with the other documents referred to herein, the entire agreement between Pledgor and Secured Party
with respect to the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subject matter hereof, and (e)&nbsp;be severable in the event that one or more of the provisions
herein is determined to be illegal or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 16. <U>Expenses.</U> Pledgor will, upon demand, pay to Secured Party all reasonable
expenses, including the reasonable fees and expenses of its counsel and of any experts and agents,
which Secured Party may incur in connection with (a)&nbsp;the administration of this Agreement, (b)&nbsp;the
custody or preservation of, or the sale of, collection from, or other realization upon, any of the
Collateral, (c)&nbsp;the exercise or enforcement of any of the rights of Secured Party hereunder, and
(d)&nbsp;the failure by Pledgor to perform or to observe any of the provisions hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 17. <U>Obligations Unconditional.</U> The obligations of Pledgor under this
Agreement shall be absolute and unconditional and shall not be released, discharged, reduced, or
in any way impaired by any circumstance whatsoever, including, without limitation, any amendment,
modification, extension or renewal of this Agreement, the Secured Obligations, or any document or
instrument evidencing, securing or otherwise relating to the Secured Obligations, or any release,
subordination, or impairment of collateral, or any waiver, consent, extension, indulgence,
compromise, settlement, or other action or inaction in respect of this Agreement, the Secured
Obligations or any document or instrument evidencing, securing or otherwise relating to the
Secured Obligations, or any exercise or failure to exercise any right, remedy, power or privilege
in respect of the Secured Obligations. No failure on the part of Secured Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power, or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights provided for in this
Agreement are cumulative and not exclusive of any rights and remedies provided by law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 18. <U>Return of Collateral.</U> Subject to any duty imposed by law or by contract to
the holder of any subordinate lien on the Collateral known to Secured Party, and subject to the
direction of a court of competent jurisdiction, upon payment in full of the Secured Obligations,
Pledgor shall be entitled to return of the Collateral in the possession of Secured Party; provided,
however that Secured Party shall not be obligated to return to Pledgor or deliver to the holder of
any subordinate lien any such Collateral until such time, but in no event to exceed ninety days
after payment in full of the Secured Obligations, as Secured Party is reasonably satisfied that the
payment of the Secured Obligations is not subject to being recaptured under applicable bankruptcy
laws. The return of Collateral, however effected, shall be without recourse to Secured Party. The
return of Collateral shall be effected without representation or warranty and shall entitle Pledgor
to all necessary endorsements, without recourse or warranty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
19. <U>Amendments, Waiver.</U> No amendment or waiver of any provision of this
Agreement nor consent to any departure by Pledgor herefrom shall in any event be effective unless
the same shall be in writing and signed by Secured Party and Pledgor, and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 20. <U>Notices.</U> All notices, requests, demands, directions and other
communications provided for hereunder must be in writing and must be mailed, certified or
registered mail, return receipt requested, telegraphed, telecopied, delivered or sent by cable to
the appropriate party (and to the persons so designated to receive copies thereof) at the
addresses set
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 9 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">forth below. Any notice, request, demand, direction or other communication required or permitted
hereunder which is given by mail will be effective on the earlier of receipt or the third business
day after deposit in the United States mail with certified or registered postage prepaid; if given
by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by
telecopier, when received; or if given by personal delivery, when delivered. Notices shall be
addressed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If to Pledgor:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prime Offshore L.L.C.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">9821 Katy Freeway, Suite&nbsp;1050</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Houston, Texas 77024</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: Jim R. Brock</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">If to Secured Party:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty Bank, FSB, as Administrative Agent</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">333 Clay Street, Suite&nbsp;4400</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Houston, Texas 77002</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: David M. Butler</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Addresses for notices, requests, demands, directions and other communications provided for
hereunder, and/or the persons so designated to receive copies thereof, may be redesignated by a
party by a written notice sent to all of the other parties hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 21. <U>Secured Party and Lenders.</U> Secured Party is the agent for each Lender
under the Credit Agreement. The security interest and all rights granted to Secured Party under or
in connection with this Agreement are for each Lender&#146;s ratable benefit. Secured Party may,
without the joinder of any Lender, exercise any rights or remedies in Secured Party&#146;s or Lenders&#146;
favor under or in connection with this Agreement, including, without limitation, conducting any
foreclosure sales and executing full or partial releases of, amendments or modifications to, or
consents or waivers under this Agreement. Secured Party&#146;s and each Lender&#146;s rights and obligations
<I>vis-&#224;-vis</I> each other may be subject to one or more separate agreements between those parties.
However, Pledgor need not inquire about any such agreement and is not subject to any terms of it.
Therefore, neither Pledgor nor its successors or assigns is entitled to any benefits or provisions
of any such separate agreement or is entitled to rely upon or raise as a defense any party&#146;s
failure or refusal to comply with the provisions of it.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 22. <U>Counterparts.</U> This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
23. <U>Governing Law, Terms.</U> This Agreement is to be governed by and construed
in accordance with the laws of the State of Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 24. <U>Reinstatement of Rights.</U> Secured Party&#146;s rights hereunder shall be
reinstated and revived, and the enforceability of this Agreement shall continue, with respect to
any amount at any time paid on account of the Secured Obligations which thereafter shall be
required to be restored or returned by Secured Party upon the bankruptcy, insolvency or
reorganization of Pledgor, or any other person, all as though such amount had not been paid.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 10 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have executed and delivered this Pledge Agreement as of
the date first above written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>SECURED PARTY:</B></U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>GUARANTY BANK, FSB</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">as Agent</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Kelly L. Elmore, III</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kelly L. Elmore, III</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><U><B>PLEDGOR:</B></U></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIME OFFSHORE L.L.C.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jim R. Brock</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jim R. Brock</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 11 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT &#147;A&#148;</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ASSIGNMENT OF PARTNERSHIP INTEREST</B></U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Prime Offshore L.L.C., a Delaware limited liability
company (&#147;<u>Assignor</u>&#148;) hereby
sells, assigns, transfers and conveys to __________ (&#147;Assignee&#148;), all of its right, title<BR>
and interest in and to its partnership interest in FWOE Partners L.P., a Delaware limited
partnership (the &#147;<U>Partnership</U>&#148;), including Assignor&#146;s right to receive from the Partnership all
amounts payable to Assignor from and after the date hereof in consideration of the foregoing
transfer, Assignee agrees that, subject to the immediately preceding sentence, it shall be bound
by all of the terms and provisions of the partnership agreement governing the Partnership and
shall perform and observe all of the covenants, duties and obligations contained therein from and
after the date of Assignee&#146;s admission as a partner in the Partnership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Assignment of Partnership Interest is executed as of June&nbsp;29, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASSIGNOR:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIME OFFSHORE L.L.C.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jim R. Brock</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ASSIGNEE:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">a</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>

<TD colspan="3" align="left" valign="top"><DIV style="border-top: 1px solid #000000; margin-left:10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->A-i<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.28
<SEQUENCE>18
<FILENAME>d44173exv10w28.htm
<DESCRIPTION>COMPLETION AND LIQUIDITY MAINTENANCE AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w28</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.28
</DIV>


<DIV align="CENTER" style="font-size: 10pt; margin-top: 12pt"><U><B>COMPLETION AND LIQUIDITY MAINTENANCE AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS COMPLETION AGREEMENT AND LIQUIDITY </B><B>MAINTENANCE</B> <B>AGREEMENT </B>(&#147;<U>Agreement</U>&#148;) is made and
entered into effective as of June&nbsp;29, 2006 between
<B>PRIMEENERGY CORPORATION </B>(&#147;<U>Prime</U>&#148;), <B>GUARANTY
BANK, FSB </B>(&#147;<U>Guaranty</U>&#148;) and <B>PRIME OFFSHORE L.L.C. </B>(&#147;<U>Offshore</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prime is the majority shareholder of Prime Offshore L.L.C. (&#147;<U>Offshore</U>&#148;). Offshore and
Guaranty are parties to a Credit Agreement dated June&nbsp;29, 2006, by and between Offshore as
Borrower and Guaranty, as Agent and Lender (&#147;<U>Credit Agreement</U>&#148;) wherein Guaranty is loaning
certain funds to Offshore to drill and complete wells and construct, install and operate in-field
and flow pipelines, caissons, platforms and production facilities for wells in South Padre Island
Area OCS Blocks 1113, 1059, 1060, 1073 and 1133 and North Padre Island Area OCS Block 998
(&#147;<U>Development Project</U>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">1. <U>Completion Commitment</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the South Padre Island Area OCS Blocks 1113, 1059, 1060, 1073 and 1133 and the North
Padre Island Area OCS Block 998 shall be defined as a &#147;Project Field.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this Agreement, Project Completion shall consist of two components and be
defined as:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each Project Field in the Development Project having all planned in-field and
flow pipelines, caissons, platforms and production facilities for all the wells in such
Project Field, for which Guaranty has loaned funds, installed and operational such that
the production from all such wells can be transported to a readily available sales
point for natural gas. In addition, for each Project Field, Project Completion will
include, but not limited to:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining required permits, easements and governmental approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>executing necessary construction contract(s);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>completing tests considered usual and customary and required to
be conducted with results in accordance with those necessary to permit
operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensuring that each Project Field is free and clear of all liens
other than those in favor of Guaranty and Permitted Liens under the
Credit Agreement and;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>causing all costs of the Development Project to be paid when due; and,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">B)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the 12-inch loop pipeline from North Padre Island Area OCS Block 996 to the
pipeline owned by the Williams Companies Inc. having been constructed and installed in
accordance with the plans and specifications in the construction contract(s).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As consideration for Guaranty entering into the Credit Agreement to provide such loans for
the Development Project and to ensure Project Completion, Prime absolutely and unconditionally
warrants to Guaranty to fund the payment to Offshore of all costs that exceed the available
commitments under the Credit Agreement, including interest, for Project Completion. In the event
Offshore is in Default under Section&nbsp;7.1(f), (g), (h)&nbsp;and/or (i)&nbsp;of the Credit Agreement, then
Prime absolutely and unconditionally warrants to Guaranty the assumption of all costs for Project
Completion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2. <U>Liquidity Maintenance</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prime will, during the term of the Credit Agreement, maintain liquidity consisting of unused
revolver availability under the Credit Agreement dated December&nbsp;2, 2002, as amended, with Prime et
al and Guaranty, and/or unrestricted cash and cash equivalents of $25,000,000. This required
liquidity will reduce dollar-for-dollar with any additional shareholder advances and increase
dollar-for-dollar to a maximum of $25,000,000 with any repayment of shareholder advances. To the
extent that shareholder repayment has occurred, Prime agrees to fund additional shareholder loans
equal to the amount repayed by the shareholder, as needed to ensure Project Completion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall remain in force until each component of Project Completion is satisfied.
Once a component is satisfied, Prime&#146;s absolute and unconditional warranty to Guaranty to fund the
payment to Offshore of all costs that exceed the available commitments under the Credit Agreement
for that component, including interest, will expire.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prime understands that a breach of obligations under this Agreement would result in an Event
of Default under the Credit Agreement with Offshore that would permit Guaranty to pursue its
available remedies under the Credit Agreement. Offshore is executing this Agreement to acknowledge
that a breach of this Agreement would result in an Event of Default under the Credit Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall be deemed a contract made under and shall be construed in accordance with
and governed by the laws of the State of Texas and that actions arising out of this Agreement may
be litigated in courts having situs in Harris County, Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This agreement is executed the date first hereinafter written,
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIMEENERGY CORPORATION</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Beverly A. Cummings
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Beverly A. Cummings            &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

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<TR>
    <TD width="48%">&nbsp;</TD>
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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PRIME OFFSHORE L.L.C.</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jim R. Brock
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jim R. Brock            &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
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<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><BR>
<B>GUARANTY BANK, FSB</B> <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Kelly L. Elmore, III
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Kelly L. Elmore, III&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Senior Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>19
<FILENAME>d44173exv10w29.htm
<DESCRIPTION>PUT RIGHT AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w29</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT
10.29
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PUT RIGHT AGREEMENT</B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PUT RIGHT AGREEMENT </B>(&#147;Agreement&#148;) is made effective June&nbsp;29, 2006 by and among
<B>PRIMEENERGY CORPORATION, </B>a Delaware corporation (&#147;PEC&#148;) and <B>PRIME OFFSHORE L.L.C., </B>a Delaware
limited liability corporation (&#147;POS&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>POS holds a net 60.25% interest in proved shut-in natural gas reserves in South
Padre Island Block 1113 (OCS 24302) <BR>
(&#147;SPI-1113&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>following the installation during the fourth quarter of 2006 of production facilities
and a flow-line, POS expects to commence production from SPI-1113 at initial gross production rates
of approximately 19&nbsp;million cubic feet per day (&#147;mcfpd&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>POS on or before July&nbsp;15, 2006 anticipates entering into a Master Agreement with
Shell Trading (US)&nbsp;Company (&#147;Shell&#148;) and according to the terms and conditions contained therein,
fixed price commodity swap transactions with Shell for volumes of natural gas not to exceed
monthly volumes listed in Exhibit&nbsp;I (the &#147;Gas Swap Agreement&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>POS desires, on the terms and conditions more specifically set forth below, the
right to put and assign to PEC its rights and obligations under the Gas Swap Agreement (the &#147;Put
Right&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS, </B>in the event POS exercises its Put Right, PEC desires to accept the rights and
obligations of POS under the Gas Swap Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW, THEREFORE, </B>for and in consideration of the premises set forth above, the
representations, warranties and covenants set forth below and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, PEC and POS hereby
agree as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <I>Put Conditions. </I>If POS and Shell enter into the Gas Swap Agreement and one of the
following additional conditions (&#147;Put Conditions&#148;) is met,;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Production from SPI-1113 has not commenced and, in the sole judgment of POS, is reasonably
not expected to commence on or before December&nbsp;15, 2006, and POS does not forecast having natural
gas production net to its interest from SPI-1113 and other sources equal to or exceeding 125% of
the monthly quantities contained in the Gas Swap Agreement; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Production from SPI-1113 has commenced and POS does not forecast having natural gas
production net to its interest from SPI-1113 and other sources equal to or exceeding 125% of the
monthly quantities contained in the Gas Swap Agreement; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;POS and PEC agree in writing;
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">then POS shall have the right but not the obligation to exercise the Put Right and PEC shall
accept the rights and obligations of POS under the Gas Swap Agreement if POS exercises such right.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <I>Put Right. </I>Provided POS and Shell enter into the Gas Swap Agreement and one of the
Put Conditions occurs, POS may exercise on or after November&nbsp;15, 2006, the Put Right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <I>Exercise of Put Right. </I>If and when POS decides to exercise its Put Right, it shall
do so by giving written notice (&#147;Put Notice&#148;) to PEC on or before December&nbsp;15, 2006, stating its
decision to exercise its Put Right and stating a proposed effective date for the put and
assignment, which effective date shall be no sooner than five (5)&nbsp;days after the date of the Put
Notice and no later than fifteen (15)&nbsp;days after the date of the Put Notice (the &#147;Assumption
Date&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <I>Put Settlement Payment. </I>As of the Assumption Date, POS and PEC shall mutually
agree, which agreement will not be unreasonably withheld, on the <I>fair mark-to-market value </I>of the
Gas Swap Agreement (&#147;Put Settlement Amount&#148;) based on market quotes obtained from Shell or another
reliable counterparty. Within five (5)&nbsp;days after the Assumption Date, POS shall pay PEC the Put
Settlement Amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <I>Effective Date of Assumption. </I>The assignment by POS of its rights and obligations
under the Gas Swap Agreement pursuant to its exercise of the Put Right and the acceptance of such
assignment and assumption of said rights and obligations by PEC (the &#147; Assumption&#148;) shall be
effective on the Assumption Date at the time and place specified in the Put Notice, unless PEC and
POS mutually agree otherwise in writing. On the Assumption Date PEC shall deliver notice to Shell
that it has assumed the rights and obligations of POS under the Gas Swap Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <I>Governing Law and Venue. </I>This Agreement and all rights and obligations hereunder,
including matters of construction, validity and performance, shall be governed by the laws of the
state of Texas without giving effect to the principles of conflicts of laws thereof and is entered
into and to be performed in Harris County, Texas. Any legal action or other legal proceeding or
dispute arising out of or relating to this Agreement shall be resolved in the District Court of
Harris County, Texas. The parties expressly and irrevocably consent and submit to the jurisdiction
of the District Court of Harris County, Texas and agree not to assert, by way of motion, as a
defense or otherwise, in any such proceeding any claim that such party is not subject personally to
the jurisdiction of such court, that such proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that this Agreement or the subject matter hereof
may not be enforced in or by such court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <I>Amendment. </I>This Agreement may be modified or amended only by a writing duly
executed by or on behalf of all of the parties hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8. <I>Binding Effect. </I>This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns; <I>provided, however,</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>that </I>this Agreement or any right or part hereunder shall not be assigned by any party hereto
without the prior written consent of the other parties hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9. <I>Headings. </I>The headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in
connection with the construction or interpretation of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10. <I>Notices. </I>All notices to which this Agreement refers shall be in writing and shall
be delivered by hand or by reputable overnight courier service, charges prepaid, and shall, unless
otherwise stated in this Agreement, be deemed to have been given when received by the party to
whom it is addressed at the addresses set forth below:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">If to PEC:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">PrimeEnergy Corporation<BR>
1 Landmark Square, 11<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor<BR>
Stamford, Connecticut 06901
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">Facsimile: (203)&nbsp;35-5786<BR>
Telephone: (203)&nbsp;358-5701<BR>
Attention: Charles E. Drimal, Jr.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">If to POS:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">Prime Offshore L.L.C.<BR>
9821 Katy Freeway, Suite&nbsp;1050<BR>
Houston, Texas 77024
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">Facsimile: (713) 461-9231<BR>
Telephone: (713) 461-7221<BR>
Attention: Jim R. Brock
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11. <I>Rights of Third Parties. </I>All provisions herein are imposed solely and exclusively
for the benefit of PEC and POS. No other persons shall have any right, benefit, priority, or
interest hereunder or as a result hereof or having standing to require satisfaction of provisions
hereof in accordance with their terms. Notwithstanding the foregoing, Guaranty Bank, FSB will
retain its rights under the Security Agreement dated June&nbsp;29, 2006, between Prime Offshore L.L.C.
and Guaranty Bank, FSB.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12. <I>Counterparts. </I>This Agreement may be executed in separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such counterparts shall
together constitute one and the same instrument.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day first written above.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIMEENERGY CORPORATION</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Beverly A. Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Name: Beverly A. Cummings</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Title: Executive Vice President &#038; CFO</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>PRIME OFFSHORE L.L.C.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jim R. Brock</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Name: Jim R. Brock</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Title: President &#038; CFO</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT I</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Maximum Fixed Price Swap Volumes<BR>
(In Thousand Cubic Feet)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Month</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Volume</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">July&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">November&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14
<SEQUENCE>20
<FILENAME>d44173exv14.htm
<DESCRIPTION>CODE OF BUSINESS CONDUCT AND ETHICS
<TEXT>
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<HEAD>
<TITLE>exv14</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;14</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">PrimeEnergy Corporation<BR>
Code of Business Conduct and Ethics
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Introduction:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s code of Business Conduct and Ethics covers a wide range of business practices
and procedures. It does not cover every issue that may arise, but it sets out basic principles to
guide all employees of the Company and its subsidiaries. All of our employees must conduct
themselves accordingly and seek to avoid even the appearance of improper behavior. The Code should
also be provided to and followed by the Company&#146;s agents and representatives, including
consultants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a law conflicts with a policy in the code, you must comply with the law; however, if a
local custom or policy conflicts with the Code, you must comply with the Code. If you have any
questions about these conflicts, you should ask your supervisor how to handle the situation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of the issues subject to the Code are also subject to further guidance and requirements
as set forth in the Company&#146;s Employee Handbook. Accordingly, employees are expected to adhere to
the Code as well as to the Employee Handbook.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Those who violate the standards in the Code will be subject to disciplinary action. <I>If you are
in a situation which you believe may violate or lead to a violation of the Code, follow the
guidelines described in Section&nbsp;14 of the Code.</I>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>1.</B>&nbsp;&nbsp; <U><B>Compliance with Laws, Rules and Regulations</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obeying the law, both in letter and in spirit, is the foundation on which the Company&#146;s
ethical standards are built. All employees must respect and obey the laws of the cities, states
and countries in which we operate. Although not all employees are expected to know the details
of these laws, it is important to know enough to determine when to seek advice from supervisors,
managers or other appropriate personnel.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.</B>&nbsp;&nbsp; <U><B>Conflicts of Interests</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;conflict of interest&#148; exists when a person&#146;s private interests interferes in any way
with the interests of the Company. A conflict situation can arise when an employee, officer or
director takes actions or has interests that may make it difficult to perform his or her Company
work objectively and effectively. Conflicts of interest may also arise when an employee,
officer or director, or members of his or her family, receives improper personal benefits as a
result of his or her position in the Company. Loans to, or guarantees of obligations of,
employees and their family members may create conflicts of interest.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is almost always a conflict of interest for a Company employee to work simultaneously
for a competitor, customer or supplier. You are not allowed to work for a competitor as a
consultant or board member. The best policy is to avoid any direct or indirect business
connection with our customers, suppliers or competitors, except on our behalf. Conflicts of
interest are prohibited as a matter of Company policy, except under guidelines approved by the
Board of Directors. Conflicts of interest may not always be clear-cut, so if you have a
question, you should consult with higher levels of management in the Company. Any employee,
officer or director who becomes aware of a conflict or potential conflict should bring it to the
attention of a supervisor, manager or other appropriate personnel or consult the procedures
described in Section&nbsp;14 of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.</B>&nbsp;&nbsp; <U><B>Insider Trading</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employees who have access to confidential information are not permitted to use or share
that information for stock trading purposes or for any other purpose except the conduct of our
business. All non-public information about the Company should be considered confidential
information. To use non-public information for personal financial benefit or to &#147;tip&#148; other who
might make an investment decision on the basis of this information is not only unethical but
also illegal. If you have any questions, please consult the Company&#146;s Corporate Secretary.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.</B>&nbsp;&nbsp; <U><B>Corporate Opportunities</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employees, officers and directors are prohibited from taking for themselves personally
opportunities that are discovered through the use of corporate property, information or position
without the consent of the Board of Directors. No employee may use corporate property,
information or position for improper personal gain, and no employee may compete with the Company
directly or indirectly. Employees, officers and directors owe a duty to the Company to advance
its legitimate interests when the opportunity to do so arises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.</B>&nbsp;&nbsp; <U><B>Competition and Fair Dealing</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to outperform our competition fairly and honestly. We seek competitive advantages
through superior performance, never through unethical or illegal business practices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stealing proprietary information, possessing trade secret information that was obtained
without the owner&#146;s consent, or inducing such disclosures by past or present employees of other
companies is prohibited. Each employee should endeavor to respect the right of and deal fairly
with the Company&#146;s customers, suppliers, competitors and employees. No employee should take
unfair advantage of anyone through manipulation, concealment, abuse of privileged information,
misrepresentation of material facts, or any intentional unfair-dealing practices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purpose of business entertainment and gifts in a commercial setting is to create good
will and sound working relationships, not to gain unfair advantage with customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No gift or entertainment should ever be offered, given, provided or accepted by any Company
employee, family member of an employee or agent unless it is in accordance with the Company&#146;s
employee handbook guidelines regarding this matter.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.</B>&nbsp;&nbsp; <U><B>Discrimination and Harassment</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The diversity of the Company&#146;s employees is a tremendous asset. We are firmly committed to
providing equal opportunity in all aspects of employment and will not tolerate any illegal
discrimination or harassment or any kind. Examples include derogatory based on racial or ethnic
characteristics and sexual advances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.</B>&nbsp;&nbsp; <U><B>Health and Safety</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company strives to provide each employee with a safe and healthful work environment.
Each employee has responsibility for maintaining a safe and healthy workplace for all employees
by following the safety and health rules and practices and reporting accidents, injuries and
unsafe equipment, practices or conditions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Violence and threatening behavior are not permitted. Employees should report to work in
condition to perform their duties, free from the influence of illegal drugs or alcohol. The use
of illegal drugs in the workplace will not be tolerated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.</B>&nbsp;&nbsp; <U><B>Record-Keeping</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company requires honest and accurate recording and reporting of information in order to
make responsible business decisions. For example, only the true and actual number of hours
worked should be reported.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many employees regularly use business expense accounts, which must be documented and
recorded accurately. If you are not sure whether a certain expense is legitimate, ask your
supervisor or your manager. Specific rules and guidelines are available in the Company&#146;s
employee handbook.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the Company&#146;s books, records, accounts and financial statements must be maintained
in reasonable detail, must appropriately reflect the Company&#146;s transactions and must conform
both to applicable legal requirements and to the Company&#146;s system of internal controls.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrecorded or &#147;off the books&#148; funds or assets should not be maintained unless permitted by
applicable law or regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business records and communications often become public, and we should avoid exaggeration,
derogatory remarks, guesswork, or inappropriate characterizations of people and companies that
can be misunderstood. This applies equally to e-mail, internal memos, and formal reports.
Records should always be retained or destroyed according to the Company&#146;s record retention
policies. In accordance with those policies, in the event of litigation or governmental
investigation please consult the Company&#146;s Human Resource Department.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.</B>&nbsp;&nbsp; <U><B>Confidentiality</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employees must maintain the confidentiality of confidential information entrusted to them
by the Company or its customers, except when disclosure is required by laws or regulations.
Confidential information includes all non-public information that might be of use to
competitors, or harmful to the Company or its customers, if disclosed. It also includes
information that suppliers and customers have entrusted to us. The obligation to preserve
confidential information continues even after employment ends.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.</B>&nbsp;&nbsp; <U><B>Protection and Proper Use of Company Assets</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All employees should endeavor to protect the Company&#146;s assets and ensure their efficient
use. Theft, carelessness, and waste have a direct impact on the Company&#146;s profitability.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any suspected incident of fraud or theft should be immediately reported for investigation.
Company equipment should not be used for non-Company business, though incidental personal use
may be permitted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligation of employees to protect the Company&#146;s assets includes its proprietary
information. Proprietary information includes intellectual property such as trade secrets,
patents, trademarks, and copyrights, as well as business, marketing and service plans,
engineering and manufacturing ideas, designs, databases, records, salary information and any
unpublished financial data and reports. Unauthorized use or distribution of this information
would violate Company policy. It could also be illegal and result in civil or even criminal
penalties.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.</B>&nbsp;&nbsp; <U><B>Payments to Government Personnel</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or
indirectly, to officials of foreign governments or foreign political candidates in order to
obtain or retain business. It is strictly prohibited to make illegal payments to government
officials of any country.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the U.S. government has a number of laws and regulations regarding business
gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to
an official or employee of the U.S. Government of a gift, favor or other gratuity in violation
of these rules would not only violate Company policy but could also be a criminal offense.
State and local governments, as well as foreign governments, may have similar rules.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.</B>&nbsp;&nbsp; <U><B>Waivers of the Code of Business Conduct and Ethics</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any waiver of the Code for executive officers or directors may be made only by the Board or
a Board committee and will be promptly disclosed as required by law and application regulatory
requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.</B>&nbsp;&nbsp; <U><B>Reporting and Illegal or Unethical Behavior</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employees are encouraged to talk to supervisors, managers or other appropriate personnel
about observed illegal or unethical behavior and when in doubt about the best course of action
in a particular situation. It is the policy of the Company not to allow retaliation for reports
of misconduct by others made in good faith by employees. Employees are expected to cooperate in
internal investigations of misconduct.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.</B>&nbsp;&nbsp; <U><B>Compliance Procedures</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must all work to ensure prompt and consistent action against violations of the Code.
However, in some situations it is difficult to know right from wrong. Since we cannot
anticipate every situation that will arise, it is important that we have a way to approach a new
question or problem. These are the steps to keep in mind:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Make sure you have all the facts. In order to reach the right solutions, we
must be as fully informed as possible.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ask yourself: What specifically am I being asked to do? Does it seem
unethical or improper? This will enable you to focus on the specific question you
are faced with, and the alternatives you have. Use your judgment and common sense;
if something seems unethical or improper, it probably is.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Clarify your responsibility and role. In most situations, there is shared
responsibility. Are your colleagues informed? It may help to get other involved
and discuss the problem.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Discuss the problem with your supervisor. This is the basic guidance for
all situations. In many cases, your supervisor will be more knowledgeable about the
question, and will appreciate being brought into the decision-making process.
Remember that it is your supervisor&#146;s responsibility to help solve problems.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Seek help from Company resources. You should consult the Company&#146;s Employee
Handbook. In the rare case where it may not be appropriate to discuss an issue with
your supervisor, or where you do not feel comfortable approaching your supervisor
with your questions, discuss it locally with your office manager or your Human
Resource manager.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>You may report ethical violations in confidence and without fear of
retaliation. The Company does not permit retaliation of any kind against employees
for good faith reports of ethical violations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Always ask first, act later. If you are unsure of what to do in any
situation, seek guidance before you act.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>21
<FILENAME>d44173exv21.htm
<DESCRIPTION>SUBSIDIARIES
<TEXT>
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<TITLE>exv21</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;21</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PrimeEnergy
Management Corporation, a New York corporation 100% owned by
PrimeEnergy Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prime Operating Company, a Texas corporation 100% owned by PrimeEnergy Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Eastern Oil Well Service Company, a West Virginia corporation 100% owned by PrimeEnergy Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Southwest
Oilfield Construction Company, an Oklahoma corporation, 100% owned by PrimeEnergy Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">E O W S Midland Company, a Texas corporation, 100% owned by PrimeEnergy Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prime
Offshore L.L.C., a Delaware limited liability company 90% owned by PrimeEnergy Corporation
</DIV>


<P align="center" style="font-size: 10pt">
</DIV>

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<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>22
<FILENAME>d44173exv23.htm
<DESCRIPTION>CONSENT OF RYDER SCOTT & COMPANY L.P.
<TEXT>
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<TITLE>exv23</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;23
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">&#091;RYDER SCOTT COMPANY PETROLEUM CONSULTANTS LOGO&#093; &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">FAX (303)&nbsp;623-4258</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">621 SEVENTEENTH STREET
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SUITE 1550
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">DENVER, COLORADO 80293
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">TELEPHONE (303)&nbsp;623-9147</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSENT OF RYDER SCOTT COMPANY, L.P.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consent to the use on the Form 10-K of PrimeEnergy Corporation of our reserve report and
all schedules, exhibits, and attachments thereto incorporated by reference of Form 10-K and to any
reference made to us on Form 10-K as a result of such incorporation.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very Truly Yours,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ RYDER SCOTT COMPANY, L.P.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">RYDER SCOTT COMPANY, L.P.&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Denver, Colorado<BR>
March&nbsp;28, 2007

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 54pt">&nbsp;


</DIV>



<DIV align="center">
<TABLE style="font-size: 6pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1100 LOUISIANA, SUITE 3800
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HOUSTON, TEXAS 77002-5218
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TEL (713)&nbsp;651-9191
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FAX (713)&nbsp;651-0849</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1100, 530-8TH STREET, S.W.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CALGARY, ALBERTA T2P 2W2
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TEL (403)&nbsp;262-2799
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FAX (403)&nbsp;262-2790</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>23
<FILENAME>d44173exv31w1.htm
<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO RULE 13(A)-14(A)/15D-14(A)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;31.1 CERTIFICATIONS
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Charles E. Drimal, Jr., Chief Executive Officer of PrimeEnergy Corporation, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this annual report on Form 10-K of PrimeEnergy Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal control over financial reporting.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">March&nbsp;30, 2007</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Charles E. Drimal Jr.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Charles E. Drimal Jr&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive Officer<br>
PrimeEnergy Corporation&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>24
<FILENAME>d44173exv31w2.htm
<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO RULE 13(A)-14(A)/15D-14(A)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;31.2 CERTIFICATIONS
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Beverly A. Cummings, Chief Financial Officer of PrimeEnergy Corporation, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this annual report on Form 10-K of PrimeEnergy Corporation;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal control over financial reporting.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">March&nbsp;30, 2007</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Beverly A. Cummings.
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Beverly A. Cummings&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chief Financial Officer<br>
PrimeEnergy Corporation&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>25
<FILENAME>d44173exv32w1.htm
<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO SECTION 1350
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the annual report of PrimeEnergy Corporation (the &#147;Corporation&#148;) on Form 10-K
for the period ending December&nbsp;31, 2006, as filed with the Securities and Exchange Commission on
the date hereof (the &#147;Report&#148;), I, Charles E. Drimal Jr., Chief Executive Officer of PrimeEnergy
Corporation, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Charles E. Drimal Jr.<BR>
<DIV style="font-size: 3pt; margin-top: 1pt; width: 33%; border-top: 1px solid #000000">&nbsp;</DIV>

</DIV>

<DIV align="left" style="font-size: 10pt">Chief Executive Officer</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">March&nbsp;30, 2007
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>26
<FILENAME>d44173exv32w2.htm
<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO SECTION 1350
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT 32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the annual report of PrimeEnergy Corporation, (the &#147;Corporation&#148;) on Form 10-K
for the period ending December&nbsp;31, 2006, as filed with the Securities and Exchange Commission on
the date hereof (the &#147;Report&#148;), I, Beverly A. Cummings, Chief Financial Officer of PrimeEnergy
Corporation, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Beverly A. Cummings<BR>
<DIV style="font-size: 3pt; margin-top: 1pt; width: 33%; border-top: 1px solid #000000">&nbsp;</DIV>

</DIV>

<DIV align="left" style="font-size: 10pt">Chief Financial Officer<BR>
March&nbsp;30, 2007</DIV>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>27
<FILENAME>d44173d4417300.gif
<DESCRIPTION>GRAPHIC
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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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