“ Current Liabilities ” means all liabilities which would, in accordance with GAAP, be included as current liabilities, on a consolidated basis, on the balance sheet of Guarantor as of the date of calculation.

“ Interest Expense ” means, for any period, the total interest expense (including, without limitation, interest expense attributable to capitalized leases) of Guarantor, on a consolidated basis, for such period, determined in accordance with GAAP.

“ Net Income ” means, for any period, the net income (or loss) of Guarantor, on a consolidated basis, for such period, determined in accordance with GAAP.

“ Permitted Commodity Hedge Agreements ” means crude oil, natural gas, or other hydrocarbon Commodity Hedge Agreements; provided that (i) such agreements are in form and substance and with a Person acceptable to the Lender, in its discretion, (ii) each transaction under such agreement must also be approved by the Lender, (iii) that the floor prices in such agreements are not less than the prices used by the Lender in its most recent Borrowing Base determination, and (iv) such agreements comply with the requirements set forth Section 6.17 .

Section 2.7 , Borrowing Base , of the Credit Agreement is hereby amended by replacing the text of subsection (a) thereof with the following text:

“(a)  The Borrowing Base as of the First Amendment Closing Date is acknowledged by the Borrowers and the Lender to be $3,250,000.  The amount of the Borrowing Base (as adjusted from time to time under the terms of this Agreement) shall be reduced by $0.00 on June 1, 2009 and by $58,000 on July 1, 2009 and on the first day of each month thereafter (the “ Monthly Borrowing Base Reduction ”).”

Section 6.16 , Tangible Net Worth , is hereby amended by replacing the text of that section in its entirety with the following text:

“Section 6.16  Tangible Net Worth . Permit, as of the close of any fiscal quarter, Guarantor’s tangible net worth, on a consolidated basis, to be less than seventy-five percent (75%) of its tangible net worth, on a consolidated basis, as of March 31, 2009, plus the aggregate total of seventy-five percent (75%) of Guarantor’s positive Net Income determined on a fiscal quarterly basis from and after April 1, 2009.”

ARTICLE 6 , Negative Covenants , is hereby amended by adding to the end thereof the following new Section 6.17:

“Section 6.17  Hedging Limitation .  Permit more than 80% of the anticipated monthly notional volumes of crude oil or natural gas attributable to the proved developed producing reserves that are projected to be produced from Borrowers’ Borrowing Base Oil and Gas Properties, as reflected in the most recently delivered Reserve Report delivered pursuant to Section 2.7 or as otherwise determined by the Lender, to be covered by Permitted Commodity Hedge Agreements.”

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II.                                      Limited Waiver .  Subject to the other terms and conditions set forth herein, Lender hereby waives Borrowers’ compliance with the obligations set forth in Section 6.14 (EBITDA to Fixed Charges) and Section 6.15 (Tangible Net Worth) of the Credit Agreement solely in relation to the fiscal quarter ending March 31, 2009.  The waiver granted hereunder does not indicate an intent to establish any course of dealing between Lender and Borrowers with regard to future waivers, consents, agreements to forbear or any other modifications that may be requested.  Lender’s agreeing to the waiver herein should not be construed as an indication that Lender would be willing to agree to any further or future consents, waivers, agreements to forbear or any modifications to any of the terms of the Credit Agreement or other Loan Documents, or any Events of Default or Defaults that may exist or occur thereunder.

III.                                  Calculation and Testing of Financial Covenants .  Borrowers and Lender hereby acknowledge and agree that the financial covenants set forth in Section 6.14 (Current Ratio), Section&nb