NOTE PURCHASE AGREEMENT

Exhibit 10.69

NOTE PURCHASE AGREEMENT

RIO VISTA PENNY LLC

TCW ASSET MANAGEMENT COMPANY,
as Administrative Agent

and

TCW ENERGY FUND X INVESTORS,
as Holders

$30,000,000 Senior Secured Notes

November 19, 2007

TABLE OF CONTENTS

		Page
ARTICLE I — Definitions and References			2
Section 1.1. Defined Terms			2
Section 1.2. Exhibits and Schedules; Additional Definitions			21
Section 1.3. Amendment of Defined Instruments			21
Section 1.4. References and Titles			21
Section 1.5. Calculations and Determinations			22
Section 1.6. Joint Preparation; Construction of Indemnities and Releases			22
ARTICLE II — Purchase and Sale of Securities			22
Section 2.1. Note Purchase; Amendment & Restatement			22
Section 2.2. The Notes			23
Section 2.3. Requests for New Loans			23
Section 2.4. [Reserved]			24
Section 2.5. Use of Proceeds			24
Section 2.6. Interest Rates and Fees; Payment Dates			24
Section 2.7. Collateral Account			25
Section 2.8. Mandatory Prepayments & Note Exchange			27
Section 2.9. Optional Prepayments			28
Section 2.10. Financing Arrangements			28
ARTICLE III — Payments to Holders			28
Section 3.1. General Procedures			28
Section 3.2. Payment of Interest			29
Section 3.3. Place of Payment			29
Section 3.4. Capital Reimbursement			29
Section 3.5. Reimbursable Taxes			30
ARTICLE IV — Conditions Precedent to Lending			31
Section 4.1. Closing Date Conditions			31
Section 4.2. Additional Conditions Precedent			33
Section 4.3. Conditions Precedent to Company’s Obligations			34
ARTICLE V — Representations and Warranties of Company			35
Section 5.1. No Default			35
Section 5.2. Organization and Good Standing			35
Section 5.3. Authorization			35
Section 5.4. No Conflicts or Consents			35
Section 5.5. Enforceable Obligations			36
Section 5.6. Initial Pro Forma Financial Statements			36
Section 5.7. Other Obligations and Restrictions			36
Section 5.8. Full Disclosure			36
Section 5.9. Litigation			37

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		Page
Section 5.10. Labor Disputes and Acts of God			37
Section 5.11. ERISA Plans and Liabilities			37
Section 5.12. Environmental and Other Laws			37
Section 5.13. Insurance			38
Section 5.14. Names and Places of Business			38
Section 5.15. Subsidiaries			38
Section 5.16. Government Regulation			38
Section 5.17. Solvency			39
Section 5.18. Title to Properties; Licenses			39
Section 5.19. Regulation U			39
Section 5.20. Leases and Contracts; Performance of Obligations			40
Section 5.21. Marketing Arrangements			40
Section 5.22. Right to Receive Payment for Future Production			41
Section 5.23. Operation of Oil and Gas Properties			41
Section 5.24. Ad Valorem and Severance Taxes; Litigation			41
Section 5.25. Acquisition			42
ARTICLE VI — Representations and Warranties of Holders			42
Section 6.1. Organization of Holders			42
Section 6.2. Authority of Holders			42
Section 6.3. Compliance with Laws and Other Instruments			42
Section 6.4. Acquisition for Holder’s Account			42
Section 6.5. Notes Not Registered			43
Section 6.6. Accredited Investor			43
ARTICLE VII — Affirmative Covenants of Company			43
Section 7.1. Payment and Performance			43
Section 7.2. Books, Financial Statements and Reports			43
Section 7.3. Notice of Material Events and Change of Address			46
Section 7.4. Maintenance of Properties			47
Section 7.5. Maintenance of Existence and Qualifications			47
Section 7.6. Payment of Trade Liabilities, Taxes, etc.			47
Section 7.7. Insurance			47
Section 7.8. Performance on Company’s Behalf			48
Section 7.9. Interest			48
Section 7.10. Compliance with Agreements and Law			48
Section 7.11. Board Observation Rights			48
Section 7.12. Separateness Covenants			49
Section 7.13. Environmental Matters; Environmental Reviews			49
Section 7.14. Evidence of Compliance			50
Section 7.15. Bank Accounts; Offset			50
Section 7.16. Guaranties of Company’s Subsidiaries			50
Section 7.17. Agreement to Deliver Security Documents			51
Section 7.18. Production Proceeds			51
Section 7.19. Leases and Contracts; Performance of Obligations			52
Section 7.20. Approved Plan of Development; Project Area			52
Section 7.21. Hedging Contracts			52

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Section 7.22. Other Information and Inspections			52
Section 7.23. Post Closing Items			53
ARTICLE VIII — Negative Covenants of Company			54
Section 8.1. Indebtedness			54
Section 8.2. Limitation on Liens			54
Section 8.3. Limitation on Hedging Contracts			54
Section 8.4. Limitation on Mergers, Issuances of Securities			54
Section 8.5. Limitation on Dispositions of Property			54
Section 8.6. Limitation on Dividends and Redemptions			55
Section 8.7. Limitation on Investments and New Businesses			56
Section 8.8. Limitation on Credit Extensions			56
Section 8.9. Transactions with Affiliates			56
Section 8.10. Prohibited Contracts			56
Section 8.11. Coverage Ratio			57
Section 8.12. Current Ratio			57
Section 8.13. Amendments to Organizational Documents; Other Material Agreements			57
Section 8.14. Acquisition Documents			57
Section 8.15. Excess Drilling & Completion Costs			57
Section 8.16. General and Administrative Expenses			57
Section 8.17. Capital Expenditures			57
ARTICLE IX — Events of Default and Remedies			58
Section 9.1. Events of Default			58
Section 9.2. Remedies			60
ARTICLE X — TRANSFERABILITY OF SECURITIES			60
Section 10.1. Restrictive Legend			60
ARTICLE XI — Administrative Agent			61
Section 11.1. Appointment and Authority			61
Section 11.2. Exculpation, Administrative Agent’s Reliance, Etc.			61
Section 11.3. Credit Decisions			62
Section 11.4. Indemnification			62
Section 11.5. Rights as Holder			63
Section 11.6. Sharing of Set-Offs and Other Payments			63
Section 11.7. Investments			63
Section 11.8. Benefit of Article XI			64
Section 11.9. Resignation			64
Section 11.10. Notice of Default			64
Section 11.11. Limitation of Duties and Fiduciary Relationship			65
Section 11.12. Limitation of Liability			65
Section 11.13. Reliance upon Documentation			65
Section 11.14. Reliance by Company			65

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		Page
ARTICLE XII — Miscellaneous			66
Section 12.1. Waivers and Amendments; Acknowledgments			66
Section 12.2. Survival of Agreements; Cumulative Nature			68
Section 12.3. Notices			69
Section 12.4. Payment of Expenses; Indemnity			70
Section 12.5. Joint and Several Liability			71
Section 12.6. Registration, Transfer, Exchange, Substitution of Notes			72
Section 12.7. Confidentiality			73
Section 12.8. Governing Law; Submission to Process			74
Section 12.9. Limitation on Interest			75
Section 12.10. Termination; Limited Survival			75
Section 12.11. Severability			76
Section 12.12. Counterparts; Fax			76
Section 12.13. Third Party Beneficiaries			76
Section 12.14. USA PATRIOT Act Notice			76
Section 12.15. Waiver of Jury Trial, Punitive Damages, etc.			76
Section 12.16. Amendment and Reconveyance Fee			77
Section 12.17. Amendment and Restatement			77

Schedules and Exhibits :

Schedule 1		—		Disclosure Schedule
Schedule 2		—		Security Schedule
Schedule 3		—		Insurance Schedule
Schedule 4		—		Holders Schedule
Schedule 5		—		Organizational Structure
Schedule 6		—		Approved Plan of Development
Exhibit A		—		Form of Promissory Note
Exhibit B		—		Form of Borrowing Notice
Exhibit C		—		Form of Prepayment Notice
Exhibit D		—		Certificate Accompanying Financial Statements
Exhibit E		—		Form of Opinion of Counsel
Exhibit F		—		Form of Approval Letter

[Note Purchase Agreement]

NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT is made as of November 19, 2007, by and among:

	•		Rio Vista Penny LLC, an Oklahoma limited liability company (“ Company ”);
	•		TCW Energy Fund X — NL, L.P., a California limited partnership (“ Fund X — NL ”);
	•		TCW Energy Fund XB — NL, L.P., a California limited partnership (“ Fund XB — NL ”);
	•		TCW Energy Fund XC — NL, L.P., a California limited partnership (“ Fund XC — NL ”);
	•		TCW Energy Fund XD — NL, L.P., a California limited partnership (“ Fund XD — NL ”);
	•		TCW Asset Management Company (“ TAMCO ”), a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TAMCO and Trust Company of the West (“ TCW ”), a California trust company, as Sub-Custodian;
	•		TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of March 18, 2004 among ING Life Insurance and Annuity Company, TAMCO and TCW as Sub-Custodian;
	•		TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003, among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TAMCO and TCW as Sub-Custodian (TAMCO in the capacities designated above, Fund X — NL, Fund XB — NL, Fund XC — NL, and Fund XD — NL together with their respective successors and assigns, are hereinafter collectively referred to as the “ Holders ”, each a “ Holder ”); and
	•		TAMCO, as Administrative Agent (together with its successors in such capacity, the “ Administrative Agent ”).

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RECITALS:

WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;

WHEREAS, Existing Borrower, Administrative Agent and Holders entered into the Existing Note Purchase Agreement, for the purpose and consideration therein expressed, whereby Holders became obligated to make loans to Existing Borrower as therein provided;

WHEREAS, Existing Borrower and Company entered into the Acquisition GM Agreement wherein Existing Borrower agreed to convey the Assets (as such term is defined in the Acquisition GM Agreement) of Existing Borrower to Company, subject to the Liens of Administrative Agent and Holders under the Existing Note Purchase Agreement, and Company agreed to assume all indebtedness and obligations owing by Existing Borrower under the Existing Note Purchase Agreement; and

WHEREAS, Administrative Agent and Holders consented to the conveyance of such GM Assets to Company, and Company assumed and promised to pay according to the terms thereof all Existing Obligations and also assumed and promised to keep and perform all other covenants and obligations in the Existing Note Purchase Agreement and all other Existing Credit Documents to be performed by Existing Borrower thereunder, in each case pursuant to the terms, conditions, and provisions set forth in the Assumption Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, in consideration of the loans which may hereafter be made by Holders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I — Definitions and References

Section 1.1. Defined Terms . As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below:

“Acquisition” means (a) the purchase by Company of the Assets (as such term is defined in the Acquisition Penny Agreement), (b) the purchase by GO of the Membership Interests (as such term is defined in the Acquisition GO Agreement) of GO LLC, and (c) the purchase by Company of the Assets of Existing Borrower.

“ Acquisition Agreements ” means, collectively, (a) the Acquisition Penny Agreement, (b) the Acquisition GO Agreement, and (c) the Acquisition GM Agreement.

“ Acquisition Closing Date ” means the date on which the closing of the Acquisition occurs under the Acquisition Documents.

“ Acquisition Documents ” means (a) the Acquisition Agreements, (b) the transfers, assignments and conveyances executed and delivered pursuant thereto, and (c) all other agreements, assignments, deeds, conveyances, certificates and other documents and instruments now or hereafter executed and delivered pursuant to the Acquisition Agreements or in connection with the Acquisition.

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“ Acquisition GM Agreement ” means that certain Asset Purchase Agreement dated as of October 1, 2007 by and between Company and Existing Borrower, as amended by that certain Amendment to Asset Purchase Agreement dated as of November 16, 2007.

“ Acquisition GO Agreement ” means that certain Stock Purchase Agreement dated as of October 2, 2007 by and between GO and Outback Production, Inc., a Nevada corporation, GO LLC, and the shareholders named therein, as amended by that certain Amendment to Membership Interest Purchase and Sale Agreement dated as of November 16, 2007.

“ Acquisition Penny Agreement ” means that certain Asset Purchase Agreement dated effective as of October 1, 2007 by and between Company and Penny Petroleum, as amended by that certain Amendment to Asset Purchase Agreement dated October 25, 2007, and that certain Second Amendment to Asset Purchase Agreement dated as of November 16, 2007.

“ Administrative Agent ” has the meaning given to such term in the preamble hereto.

“ Affiliate ” means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power:

(a) to vote 10% or more of the securities or other equity interests (on a fully diluted basis) having ordinary voting power for the election of directors, the managing general partner or partners or the managing member or members; or

(b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“ Aggregate Advance Amount ” means, at the time in question, the aggregate principal amount of Loans advanced by Holders during the term of this Agreement.

“ Agreed Pricing ” means:

(a) for anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales contract with an investment grade counterparty (or another counterparty approved by Administrative Agent), the fixed price or prices provided for in such sales contract during the term thereof;

(b) for anticipated sales of Hydrocarbons that are hedged by a fixed price Hedging Contract with an investment grade counterparty, the fixed price or prices provided for in such Hedging Contract during the term thereof, as modified by any necessary adjustment specified by Administrative Agent for quality and geographical differentials;

(c) for anticipated sales of Hydrocarbons that are hedged by a Hedging Contract with an investment grade counterparty which Hedging Contract provides for a range of prices between a floor and a ceiling, the prices provided for in subsection (d) below, provided that during the term of such Hedging Contract such prices shall in no event be less than such floor or exceed such ceiling, as such floor and ceiling are modified by any necessary adjustment specified by Administrative Agent for quality and geographical differentials;

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(d) for anticipated sales of Hydrocarbons, if such sales are not hedged by a Hedging Contract or sales contract that is described in paragraphs (a), (b), or (c) above, for the date of calculation (or, if such date is not a Business Day, for the first Business Day thereafter), and with any necessary adjustment specified by Administrative Agent for quality and geographical differentials:

(i) For the remainder of the current calendar year, the average NYMEX Pricing for the remaining contracts in the current calendar year,

(ii) For each of the succeeding three complete calendar years, the average NYMEX Pricing for the twelve months in each such calendar year,

(iii) For the succeeding fourth complete calendar year, and for each calendar year thereafter, the average NYMEX Pricing for the twelve months in such fourth calendar year.

“ Agreement ” means this Note Purchase Agreement.

“ AMI Violation ” means the ownership or acquisition, directly or indirectly of any interest of any kind (including any interests or rights of the kinds described in the definition of Oil and Gas Properties) in the Project Area by any Affiliate of or holder of Equity in Parent or Company, other than the oil and gas pipeline assets owned by GO LLC and MV Pipeline on the Acquisition Closing Date.

“ ANCF ” (or “ Adjusted Net Cash Flow ”) means the positive remainder of:

(a) Gross Cash Revenues determined on a Consolidated basis during any ANCF Quarter (or other period of calculation, if applicable), less

(b) actual Consolidated cash payments by ECO and its Subsidiaries during such ANCF Quarter (or other period of calculation, if applicable) for:

(i) Existing royalties and burdens on the Eligible Mortgaged Properties, if any, that constitute Permitted Liens (to the extent and only to the extent production receipts relating to the same are included in Gross Cash Revenues);

(ii) Direct Taxes on the Eligible Mortgaged Properties;

(iii) ANCF LOE;

(iv) ANCF Transportation Costs;

(iv) ANCF Overhead Costs;

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(v) Interest payments on the Notes and accrued commitment fees under Section 2.6(c); and

(vi) ANCF Capital Expenditures.

“ ANCF Capital Expenditures ” means capital expenditures made by Restricted Persons on the Eligible Mortgaged Properties, to the extent the same either (a) have been approved by Required Holders at the time in question by means of an Approval Letter, or (b) are included in the Approved Plan of Development, as then in effect (excluding (i) capital expenditures paid for with proceeds of Loans hereunder and (ii) any Excess Drilling & Completion Costs).

“ ANCF LOE ” means (i) leasehold operating expenses in the ordinary course of business, provided that such expenses shall in no event exceed the amount of $0.50 per mcf of natural gas (determined on a net basis to Restricted Persons), in each case without the express written approval of Required Holders (which approval may be given in their sole and absolute discretion), and (ii) other field level or lease level charges for operations on the Eligible Mortgaged Properties (excluding ANCF Capital Expenditures and other capital expenditures) that have been approved by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter.

“ ANCF Overhead Costs ” means (i) Permitted G&A Expense Amounts, and (ii) other costs of Restricted Persons to the extent such other costs have been approved as ANCF Overhead Costs by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter.

“ ANCF Quarter ” means, with respect to a Quarterly Payment Date and the calculation of ANCF, the three calendar month period ending on the last day of the most recent February, May, August or November immediately preceding such Quarterly Payment Date.

“ ANCF Transportation Costs ” means (i) the actual costs of gathering, processing, compressing, and transporting production from the Eligible Mortgaged Properties from the wellhead to the point of sale, provided that all such costs are negotiated with, and paid to, third parties in arms-length transactions on terms which are reasonable in the area of operations for the quality and quantity of such production for the time period negotiated, at the time such prices are agreed to, or (ii) other transportation or marketing costs, to the extent such other transportation and marketing costs have been approved by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter; provided that such costs shall in no event exceed the amount of (1) $0.42 per mcf of natural gas with respect to the Enogex pipeline, or (2) $0.44 per mcf of natural gas with respect to the PetroQuest pipeline, in each case without the express written approval of Required Holders (which approval may be given in their sole and absolute discretion).

“ Approval Letter ” means a letter given by Administrative Agent on behalf of Required Holders in the form of Exhibit F.

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“ Approved Plan of Development ” or “ APOD ” means Company’s written plan of development with respect to budgeted capital expenditures (including maximum annual expenditures) and other development activities that is described in Schedule 6, as amended and supplemented from time to time with the consent of Required Holders; provided that no such consent shall be required for amendments, modifications or supplements to the extent, but only to the extent, that any such amendments, modifications or supplements (a) either (i) are administrative or ministerial in nature, or (ii) would make non-material amendments to the timing for the completion of any such development (other than an amendment extending the timing of the substantial completion of the APOD), and (b) do not increase the aggregate permitted budgeted capital expenditures of Company and its Subsidiaries under such written plan.

“ Assumption Agreement ” means that certain Assumption Agreement of even date herewith among Existing Borrower, Company, Administrative Agent, and Holders.

“ Availability Period ” means the period from and including the Closing Date until the earliest to occur of: (a) the date on which an Event of Default occurs; (b) the date on which a Coverage Deficiency occurs; and (c) October 31, 2008 (or, if earlier, the day on which the obligations of Holders to make Loans hereunder have been terminated or the Notes first become due and payable in full); provided that such date may be extended in writing by Required Holders in their sole and absolute discretion.

“ Borrowing ” means a borrowing of new Loans pursuant to Section 2.3.

“ Borrowing Notice ” means a written or telephonic request, or a written confirmation, made by Company which meets the requirements of Section 2.3.

“ Budgeted Drilling & Completion Costs ” means, with respect to each well comprising part of the APOD, (a) the budgeted drilling costs for such well set forth in the APOD, and (b) the budgeted completion costs for such well set forth in the APOD.

“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York, New York.

“ Capital Lease ” means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

“ Capital Lease Obligation ” means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which should, in accordance with GAAP, appear as a liability on the balance sheet of such Person.

“ Cash Equivalents ” means Investments in:

(a) marketable obligations, maturing within twelve months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America;

(b) demand deposits, and time deposits (including certificates of deposit) maturing within twelve months from the date of deposit thereof, with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit are rated at least Aa3 by Moody’s or AA- by S & P;

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(c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in subsection (a) above entered into with any commercial bank meeting the specifications of subsection (b) above;

(d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S & P; and

(e) money market or other mutual funds substantially all of whose assets comprise securities of the types described in subsections (a) through (d) above.

“ Change of Control ” means the occurrence of any of the following events: (a) General Partner shall cease to be the sole general partner of Parent, (b) Penn Octane Corporation, a Delaware corporation shall cease to own at least fifty-one percent (51%) of the Equity of General Partner, (c) any amendment, modification or supplement to the Partnership Agreement that materially reduces the powers and discretion of General Partner to manage the business and affairs of Parent, (d) any merger or consolidation of General Partner or Parent with or into any other business entity, (e) Ian Bothwell ceases for any reason to serve as the sole Manager of Company and is not replaced within 60 days thereafter by a person reasonably acceptable to Required Holders, (f) Parent shall at any time fail to own, directly or indirectly, 100% of the then issued and outstanding Equity of ECO, or (g) ECO shall at any time fail to own, directly or indirectly, 100% of the then issued and outstanding Equity of Company or any Guarantor.

“ Closing Date ” means the date on which all of the conditions precedent set forth in Section 4.1 shall have been satisfied or waived.

“ Closing Date Transactions ” means the consummation on the Acquisition Closing Date of the transactions contemplated by the Acquisition Documents.

“ Collateral ” means all property of any kind which is subject to a Lien in favor of Holders (or in favor of Administrative Agent for the benefit of Holders) or which, under the terms of any Security Document, is purported to be subject to such a Lien.

“ Collateral Account ” means the deposit account to be established in the name of Company within ten Business Days after the date herewith with a depository institution satisfactory to Administrative Agent, or such other deposit account as may be established by Company from time to time with the prior written consent of Administrative Agent, which consent may be given or withheld in its sole and absolute discretion.

“ Collateral Account Agreement ” means all documents or agreements governing or evidencing the Collateral Account.

“ Collateral Coverage Ratio ” means the quotient of (i) the sum of (a) Restricted Persons’ Total Modified NPV10 and (b) Restricted Persons’ Working Capital (which, if negative, shall be deducted from Total Modified NPV10) divided by (ii) Restricted Persons’ total Indebtedness.

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“ Commitment ” means, as to each Holder, its obligation to make Loans to Company pursuant to Section 2.1 in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Holder’s name on the Holders Schedule under the heading “Commitment” or in the Assignment Agreement pursuant to which such Holder becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. Notwithstanding that the Note Documents are documented with reference to the Maximum Credit Amount, it is expressly understood and agreed that Holders have no obligation to make Loans up to the Maximum Credit Amount or to increase the amount of the commitments set forth on the Holders Schedule or such Assignment Agreement, as applicable, and that Holders’ commitments to make Loans hereunder is determined by reference to the “Commitment” set forth on such Holders Schedule or such Assignment Agreement, as applicable.

“ Commitment Fee Rate ” means the per annum rate equal to one-half of one percent (0.50%).

“ Company ” means Rio Vista Penny LLC, an Oklahoma limited liability company.

“ Company Confidential Information ” has the meaning given to such term in Section 12.7(b).

“ Consolidated ” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. The above reference to GAAP shall not be deemed to cause matters described herein as being on a cash basis, such as Gross Cash Revenues or ANCF, to be changed to an accrual basis.

“ Coverage Default ” means that the Collateral Coverage Ratio is less than 1.2 at any time in question.

“ Coverage Deficiency ” means the Collateral Coverage Ratio is less than 1.50 but equal to or greater than 1.20.

“ Current Ratio ” means, at any time, the ratio of ECO’s Consolidated current assets to ECO’s Consolidated current liabilities at such time. For purposes of this Agreement, “Consolidated current assets” and “Consolidated current liabilities” shall be determined in accordance with GAAP, except that Consolidated current assets and Consolidated current liabilities will be calculated without including any amounts resulting from the application of FASB Statements 133 or 143.

“ Dedication Rate ” means 90%, provided that such rate will increase to 100% whenever (a) an Event of Default exists or (b) a Coverage Deficiency occurs that is not cured within thirty (30) days after such occurrence.

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“ Default ” means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.

“ Default Rate ” means the rate per annum equal to two percent (2%) above the Fixed Rate, provided that no Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.

“ Deposit Account ” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit, and any other deposit account, as defined in the UCC.

“ Direct Taxes ” means any severance, ad valorem, or other direct taxes on properties owned by any Restricted Person or the production therefrom or the proceeds of such production; provided that federal, state, or local income or franchise taxes shall in no event be considered Direct Taxes.

“ Disclosure Schedule ” means Schedule 1 hereto.

“ Distribution ” means (a) any dividend or other distribution made by a Restricted Person on or in respect of any stock, partnership interest, or other equity interest in such Restricted Person or any other Restricted Person (including any option or warrant to buy such an equity interest), or (b) any payment made by a Restricted Person to purchase, redeem, acquire or retire any stock, partnership interest, or other equity interest in such Restricted Person or any other Restricted Person (including any such option or warrant).

“ ECO ” means Rio Vista ECO LLC, an Oklahoma limited liability company.

“ Eligible Mortgaged Properties ” means, collectively, those Oil and Gas Properties (a) which are owned by Company or any other Restricted Person and mortgaged to Administrative Agent to secure the Obligations, (b) for which Administrative Agent has received title opinions or other title information concerning such interests in form, substance and authorship satisfactory to Administrative Agent, and (c) which are free and clear of all Liens other than Permitted Liens.

“ Engineering Report ” means each engineering report delivered pursuant to Section 7.2.

“ Environmental Laws ” means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

“ Equity ” means shares of capital stock or a partnership, profits, capital, member or other equity interest, or options, warrants or any other rights to substitute for or otherwise acquire the capital stock or a partnership, profits, capital, member or other equity interest of any Person.

[Note Purchase Agreement]

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statutes or statute, together with all rules and regulations promulgated with respect thereto.

“ ERISA Affiliate ” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are treated as a single employer under Section 414 of the Internal Revenue Code.

“ ERISA Plan ” means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability.

“ Event of Default ” has the meaning given to such term in Section 9.1.

“ Excess Drilling & Completion Costs ” means, with respect to each well comprising part of the APOD, an amount (if positive) equal to the remainder of (a) the drilling and completion costs incurred to such date for such well, minus (b) the Budgeted Drilling & Completion Costs for such well.

“ Existing Borrower ” means G M Oil Properties, Inc., an Oklahoma corporation, as successor by merger to Steadfast Resources, Inc., a Nevada corporation.

“ Existing Credit Documents ” means (a) the Existing Note Purchase Agreement, (b) the Existing Notes and Security Documents (as such term is defined in the Existing Note Purchase Agreement), and (c) and all other certificates, documents, instruments or agreements executed and delivered in connection therewith.

“ Existing Note Purchase Agreement ” means that certain Note Purchase Agreement dated as of August 29, 2005 by and among Existing Borrower, Administrative Agent, and the holders party thereto, as amended or supplemented. Without limiting the provisions of the Assumption Agreement, pursuant to the Assumption Agreement, Company has assumed and promised to pay according to the terms thereof all Existing Obligations and also assumed and promised to keep and perform all other covenants and obligations in the Existing Note Purchase Agreement to be performed by Existing Borrower thereunder.

“ Existing Notes ” means the Notes (as such term is defined in the Existing Note Purchase Agreement).

“ Existing Obligations ” means the Obligations (as such term is defined in the Existing Note Purchase Agreement) evidenced by the Existing Notes in the aggregate principal amount of $16,500,000 that has been assumed by Company pursuant to the terms of the Assumption Agreement and renewed and continued (but not novated or extinguished) by this Agreement and the Notes.

“ Fiscal Quarter ” means a three-month period ending on March 31, June 30, September 30 or December 31 of any year.

[Note Purchase Agreement]

“ Fiscal Year ” means a twelve-month period ending on December 31 of any year.

“ Fixed Rate ” means the rate of ten and one-half percent (10.50%) per annum.

“ GAAP ” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Restricted Persons and their Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Pro Forma Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to any Restricted Person or with respect to any Restricted Person and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Holder, and Required Holders and Administrative Agent agree to such change insofar as it affects the accounting of such Restricted Person and its Consolidated Subsidiaries.

“ General Partner ” means Rio Vista GP LLC, a Delaware limited liability company.

“ GO ” means Rio Vista GO LLC, an Oklahoma limited liability company.

“ GO LLC ” means GO, LLC, an Oklahoma limited liability company.

“ GO Note ” means that certain Promissory Note dated of even date herewith made by GO payable to the order of Company in the original principal amount of $2,200,000.

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

“ Gross Cash Revenues ” means all cash revenues and cash receipts of ECO and its Subsidiaries on a Consolidated basis during any ANCF Quarter from any source or activity (excluding without duplication only (a) funds received from Loans hereunder, (b) funds received from capital contributions made to Restricted Persons, including sales of new Equity and funds received for options or warrants to acquire such Equity, and (c) funds belonging to or received for the credit of third parties, such as royalty, working interest or other interest owners, that are received for transfer or payment to such third parties).

“ Guarantor ” means ECO and any Subsidiary of ECO which now or hereafter executes and delivers a guaranty to Administrative Agent pursuant to Section 7.17.

“ Hazardous Materials ” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.

[Note Purchase Agreement]

“ Hedging Contract ” means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement.

“ Highest Lawful Rate ” means, with respect to each Holder Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Holder Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Holder Party as appropriate to assure that the Note Documents are not construed to obligate any Person to pay interest to any Holder Party at a rate in excess of the Highest Lawful Rate applicable to such Holder Party.

“ Holder Confidential Information ” has the meaning given to such term in Section 12.7(a).

“ Holder Parties ” means Administrative Agent and all Holders.

“ Holders ” has the meaning given to such term in the preamble hereto.

“ Holders Schedule ” means Schedule 4 hereto.

“ Hydrocarbons ” means crude oil, natural gas or other liquid or gaseous hydrocarbons.

“ Indebtedness ” of any Person means Liabilities in any of the following categories:

(a) Liabilities for borrowed money;

(b) Liabilities constituting an obligation to pay the deferred purchase price of property or services;

(c) Liabilities evidenced by a bond, debenture, note or similar instrument;

(d) Liabilities which (i) would under GAAP be shown on such Person’s balance sheet as a liability, and (ii) are payable more than one year from the date of creation or incurrence thereof (other than reserves for taxes and reserves for contingent obligations);

(e) Liabilities arising under Hedging Contracts;

(f) Capital Lease Obligations;

(g) Liabilities arising under conditional sales or other title retention agreements;

(h) Liabilities owing under direct or indirect guaranties of Liabilities of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Liabilities of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Liabilities, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection;

[Note Purchase Agreement]

(i) Liabilities (for example, repurchase agreements, mandatorily redeemable preferred stock and sale/leaseback agreements) consisting of an obligation to purchase or redeem securities or other property, if such Liabilities arise out of or in connection with the sale or issuance of the same or similar securities or property;

(j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefore;

(k) Liabilities with respect to banker’s acceptances;

(1) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under “take-or-pay” contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment); or

(m) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor;

provided, however, that the “Indebtedness” of any Person shall not include Liabilities that were incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor.

“ Independent Engineer ” means a nationally or regionally recognized independent petroleum engineering company, which may be chosen by Company if acceptable to the Required Holders in their sole and absolute discretion.

“ Initial Pro Forma Financial Statements ” means the pro forma balance sheet of Company as of the Closing Date (after giving effect to the Closing Date Transactions).

“ Insurance Advisor ” means Aon Risk Services or such other reputable insurance advisor reasonably acceptable to the Required Holders.

“ Insurance Schedule ” means Schedule 3 attached hereto.

“ Internal Revenue Code ” means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes, together with all rules and regulations promulgated with respect thereto.

“ Investment ” means any investment, made directly or indirectly, in any Person, whether by purchase, acquisition of equity interests, indebtedness or other obligations or securities or by extension of credit, loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.

[Note Purchase Agreement]

“ Law ” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. Any reference to a Law includes any amendment or modification to such Law, and all regulations, rulings, and other Laws promulgated under such Law.

“ Liabilities ” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP.

“ Lien ” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. “Lien” also means any filed financing statement, any registration of a pledge (such as with an Holder of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.

“ Loans ” means any Loan made by a Holder to Company pursuant to Section 2.1.

“ Management Services Agreement ” means the Management Services Agreement dated of even date herewith among Parent, Northport, and Company, under which Northport has agreed to provide certain management services and general and administrative services for the Restricted Persons and has made certain other agreements.

“ Material Adverse Change ” means a material and adverse change, from the state of affairs existing on November 19, 2007 or from the state of affairs represented or warranted in any Note Document, to (a) ECO’s or Parent’s Consolidated financial condition, (b) ECO’s or Parent’s Consolidated business, assets, operations, properties or prospects, considered as a whole, (c) Company’s ability to timely pay the Obligations, (d) Parent’s ability to timely perform its obligations under the Warrant, (e) Northport’s ability to timely perform its obligations under the Management Services Agreement, or (f) the enforceability of the material terms of any Note Documents.

“ Material Contracts ” means (a) the Acquisition Documents, and (b) any contract or other arrangement to which ECO or any of its Subsidiaries is a party (other than the Note Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Change.

[Note Purchase Agreement]

“ Maturity Date ” means August 29, 2010.

“ Maximum Credit Amount ” means the amount of $30,000,000.

“ Minimum Scheduled Quarterly Principal Payment ” means, with respect to any Quarterly Payment Date, an amount equal to 3.125% of the outstanding principal balance of the Notes on such date.

“ Modified NPV10 ” means the sum of:

(a) with respect to any Proved Developed Producing Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 95% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses); plus

(b) with respect to any Proved Developed Non-Producing Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 85% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses); plus

(c) with respect to any Proved Undeveloped Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 75% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses);

provided, however, that the Modified NPV10 for any particular Proved Developed Non-Producing Reserves or Proved Undeveloped Reserves shall be zero (0) unless capital expenditures for the development of such Reserves, in at least the amounts required pursuant to the most recent Engineering Report, have been approved by Holder Parties as ANCF Capital Expenditures and such capital is reasonably expected to be available from Borrowings or as a deduction from ANCF as ANCF Capital Expenditures.

“ Moody’s ” means Moody’s Investors Service, Inc., or its successor.

“ Mortgage ” means each deed of trust or mortgage from time to time given by Company or any Guarantor to secure any of the Obligations, as each may be amended, supplemented or otherwise modified from time to time.

“ MV Pipeline ” means MV Pipeline Company, an Oklahoma corporation.

“ Northport ” means Northport Production Company, an Oklahoma corporation.

“ Note ” means a promissory note in the form of Exhibit A evidencing one or more Loans, as amended, supplemented or otherwise modified from time to time.

“ Note Documents ” means this Agreement, the Notes, the Security Documents, the ORRI Conveyance, the Management Services Agreement, the Warrant, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters).

[Note Purchase Agreement]

“ NPV10 ” means, with respect to any Proved Reserves expected to be produced from the Eligible Mortgaged Properties, the net present value of the future net revenues expected to accrue to Restricted Persons’ interests in such Reserves during the remaining expected economic lives of such Reserves, discounted at 10% per annum. Each calculation of such expected future net revenues shall be made as of the date requested in accordance with the then existing standards of the Society of Petroleum Engineers and Society of Petroleum Evaluation Engineers, provided that in any event:

(a) appropriate deductions shall be made for (i) Direct Taxes and existing burdens that are Permitted Liens, (ii) leasehold operating expenses, (iii) transportation, gathering, compression, and marketing burdens, (iv) capital expenditures (including plugging and abandonment costs) included in the Approved Plan of Development or otherwise approved in writing by Required Holders, and (v) ANCF Overhead Costs, all consistent with the most recent Engineering Report;

(b) the pricing assumptions used in determining NPV10 for any particular Proved Reserves shall be the Agreed Pricing; and

(c) leasehold operating expenses and capital expenditures in the most recently delivered Engineering Report will be escalated at the then current inflation rate.

NPV10 shall be calculated hereunder in connection with each Engineering Report, either by Company, by Administrative Agent, or by the engineering firm who prepares such Engineering Report; in the event of any conflict, Administrative Agent’s calculation shall be conclusive and final, absent manifest error. As used above, “investment grade counterparty” means a Person whose senior unsecured long-term debt obligations are rated BBB- by S&P and Baa3 or higher by Moody’s.

“ NYMEX Pricing ” means, as of any date of determination:

(a) for crude oil, ninety percent (90%) of the closing settlement price for the Light, Sweet Crude Oil futures contract for the applicable month, and

(b) for natural gas, ninety percent (90%) of the closing settlement price for the Henry Hub Natural Gas futures contract for the applicable month,

in each case as published by New York Mercantile Exchange (NYMEX) on its website currently located at www.nymex.com , or any successor thereto (as such price may be corrected or revised from time to time by the NYMEX in accordance with its rules and regulations).

“ Obligations ” means all Liabilities from time to time owing by any Restricted Person to any Holder Party (or any third party beneficiary of any Note Document) under or pursuant to any of the Note Documents. “Obligation” means any part of the Obligations.

“ Observer ” has the meaning assigned to such term in Section 7.11.

[Note Purchase Agreement]

“ Oil and Gas Properties ” means all of the following which are, at the time in question, owned by ECO or any of its Subsidiaries: oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including, without limitation, mineral fee interests, lease interests, farmout interests, overriding royalty and royalty interests, net profits interests, oil payment interests, production payment interests and other types of mineral interests), and all oil and gas gathering, treating, compression, storage, processing and handling assets.

“ ORRI ” means the overriding royalty interest in the Oil and Gas Properties conveyed to Royalty Owner pursuant to the ORRI Conveyance.

“ ORRI Conveyance ” means the Overriding Royalty Conveyance executed by Existing Borrower pursuant to the Existing Note Purchase Agreement in favor of Royalty Owner whereby Existing Borrower conveyed an overriding royalty profits interest in and to its Oil and Gas Properties, as amended or supplemented.

“ Parent ” means Rio Vista Energy Partners L.P., a Delaware limited partnership.

“ Partnership Agreement ” means that certain First Amended and Restated Agreement of Limited Partnership of Rio Vista Energy Partners L.P. dated as of September 16, 2004.

“ PDP Collateral Coverage Ratio ” means the quotient of (i) the sum of (a) the Modified NPV10 with respect to all Proved Developed Producing Reserves attributable to the Eligible Mortgaged Properties, plus (b) Restricted Persons’ Working Capital (which, if negative, shall be deducted) divided by (ii) Restricted Persons’ total Indebtedness.

“ Penny Petroleum ” means Penny Petroleum Corporation, an Oklahoma corporation.

“ Percentage Share ” means, with respect to any Holder (a) when used in Section 2.1 or Section 2.2, in any Borrowing Notice or when no Loans are outstanding hereunder, the percentage set forth below such Holder’s name on Holders Schedule, and (b) when used otherwise, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Holder’s Loans at the time in question, by (ii) the sum of the aggregate unpaid principal balance of all Loans at such time.

“ Permitted ANCF Distributions ” has the meaning given to such term in Section 8.6.

“ Permitted G&A Expense Amount ” means, with respect to a calendar month, the amount equal to the “Service Fee” described in the Management Services Agreement.

“ Permitted Investments ” means

(a) Cash Equivalents; and

(b) normal and prudent extensions of credit by Restricted Persons to their customers for buying goods and services in the ordinary course of business or to another Restricted Person in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner.

[Note Purchase Agreement]

“ Permitted Liens ” means:

(a) statutory Liens for taxes, assessments or other governmental charges or levies which are not yet delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(b) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s, or other like Liens which do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the extent securing obligations which are not delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP;

(c) minor defects and irregularities in title to any property, so long as such defects and irregularities neither secure Indebtedness nor materially impair the value of such property or the use of such property for the purposes for which such property is held;

(d) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature (excluding appeal bonds) incurred in the ordinary course of business and not constituting Indebtedness;

(e) Liens under the Security Documents;

(f) with respect only to property subject to any particular Security Document, additional Liens burdening such property which are expressly allowed by such Security Document; and

(g) Liens arising on or before the date hereof securing Indebtedness permitted under Section 8.1 not to exceed the aggregate amount of $100,000.

“ Person ” means an individual, corporation, general partnership, limited partnership, limited liability company, association, joint stock company, trust or trustee thereof, estate or executor thereof, Governmental Authority, or any other legally recognizable entity.

“ Prepayment Notice ” means a notice in the form of Exhibit C, appropriately completed.

“ Project ” means all drilling and reserve acquisition activities in or relating to the Project Area.

“ Project Area ” means Haskell County, Oklahoma, McIntosh County, Oklahoma and Pittsburgh County, Oklahoma.

“ Projected PDP Oil and Gas Production ” means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular month, as applicable, from properties and interests owned by the Restricted Persons that are located in or offshore of the United States and that have attributable to them Proved Developed Producing Reserves, as such production is projected in the Engineering Report most recently delivered, after deducting projected production from any properties or interests sold or under contract for sale that had been included in such report and after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in a separate or supplemental report meeting the requirements of Section 7.2(i) or (j), as applicable, and otherwise are satisfactory to Administrative Agent.

[Note Purchase Agreement]

“ Proved Reserves ” means “Proved Reserves” as defined in the Petroleum Resources Management System as in effect at the time in question (in this definition, the “PRMS”) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers and reviewed and jointly sponsored by the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers (or any generally recognized successor organizations). “Proved Developed Producing Reserves” means Proved Reserves that are categorized as “Developed Producing Reserves” in the PRMS, “Proved Developed Nonproducing Reserves” means Proved Reserves that are categorized as “Developed Nonproducing Reserves” in the PRMS, and “Proved Undeveloped Reserves” means Proved Reserves that are categorized as “Undeveloped Reserves” in the PRMS.

“ Quarterly Payment Date ” means the second Business Day prior to the last day of each March, June, September and December.

“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect.

“ Required Holders ” means Holders whose aggregate Percentage Shares exceed fifty percent (50.0%).

“ Reserves ” means estimated volumes of crude oil, condensate, natural gas, natural gas liquids, and associated substances anticipated to be commercially recoverable from known accumulations from a given date forward, under then existing economic conditions, by established operating practices, and under current government regulations. Reserve estimates are based on interpretation of geologic or engineering data available at the time of the estimate. Reserves do not include volumes of crude oil, condensate, natural gas, or natural gas liquids that have been produced (whether held in tanks, pipelines, processing plants, or in a formation or aquifer that is being used for storage). If required for financial reporting, reserve estimates or other purposes, Reserves may be reduced for on-site or processing losses.

“ Restricted Notes ” has the meaning set forth under Rule 144 promulgated under the Securities Act.

“ Restricted Person ” means any of Company, ECO, and each Subsidiary of ECO.

“ Royalties ” means overriding royalty and royalty interests, production payments, and similar types of mineral interests.

“ Royalty Owner ” means TCW Energy Funds X Holdings, L.P.

“ S & P ” means Standard & Poor’s Ratings Services (a division of The McGraw Hill Companies), or its successor.

“ Securities Act ” means the Securities Act of 1933, as amended.

[Note Purchase Agreement]

“ Security Documents ” means the instruments listed in the Security Schedule and all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Administrative Agent in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Obligations or the performance of any Restricted Person’s other duties and obligations under the Note Documents.

“ Security Schedule ” means Schedule 2 hereto.

“ Subsidiary ” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such Person.

“ TCW Governing Documents ” has the meaning given to such term in Section 11.11.

“ Termination Event ” means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041(c) of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

“ Total Modified NPV10 ” means the sum of the Modified NPV10’s for all Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves as determined by Administrative Agent from the Engineering Report most recently prepared as of such time.

“ Transaction Documents ” means the Note Documents and the Acquisition Documents.

“ UCC ” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

“ Unused Commitment Amount ” means an amount equal to the remainder of (a) the Commitment amount, minus (b) the Aggregate Advance Amount.

“ Warrant ” means the Common Unit Purchase Warrant dated of even date herewith from Parent issued to Warrant Owner.

“ Warrant Owner ” means TCW Energy Fund X-NL, L.P., a California limited partnership, together with its successors and assigns under the Warrant.

[Note Purchase Agreement]

“ Working Capital ” means ECO’s Consolidated current assets minus ECO’s Consolidated current liabilities. For purposes of this definition, “Consolidated current assets” and “Consolidated current liabilities” shall be determined in accordance with GAAP, except that:

(a) current assets will be calculated without including inventory and without including any accounts receivable or other Indebtedness owed to ECO or its Subsidiaries by their Affiliates;

(b) “Consolidated current assets” and “Consolidated current liabilities” will be calculated without including any amounts resulting from the application of FASB Statement 133;

(c) accounts receivable more than 90 days delinquent will be deleted; and

(d) so long as no Event of Default or Default has occurred, current liabilities will be calculated without including any payments of current maturities of principal on the Notes.

Section 1.2. Exhibits and Schedules; Additional Definitions . All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference.

Section 1.3. Amendment of Defined Instruments . Unless the context otherwise requires or unless otherwise provided herein the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments and restatements of such agreement, instrument or document, provided that nothing contained in this section shall be construed to authorize any such renewal, extension, modification, amendment or restatement.

Section 1.4. References and Titles . All references in this Agreement to Exhibits, Schedules, articles, sections, subsections and other subdivisions refer to the Exhibits, Schedules, articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Exhibits and Schedules to any Note Document shall be deemed incorporated by reference in such Note Document. References to any document, instrument, or agreement (a) shall include all exhibits, schedules, and other attachments thereto, and (b) shall include all documents, instruments, or agreements issued or executed in replacement thereof. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases “this section” and “this subsection” and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word “or” is not exclusive, and the word “including” (in its various forms) means “including without limitation”. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. References to “days” shall mean calendar days, unless the term “Business Day” is used. Unless otherwise specified, references herein to any particular Person also refer to its successors and permitted assigns.

[Note Purchase Agreement]

Section 1.5. Calculations and Determinations . All calculations under the Note Documents of interest chargeable with respect to Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. Each determination by a Holder Party of amounts to be paid under Article III or any other matters which are to be determined hereunder by a Holder Party shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Required Holders otherwise consent all financial statements and reports furnished to any Holder Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP.

Section 1.6. Joint Preparation; Construction of Indemnities and Releases . This Agreement and the other Note Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and no rule of construction shall apply hereto or thereto which would require or allow any Note Document to be construed against any party because of its role in drafting such Note Document. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.

ARTICLE II — Purchase and Sale of Securities

Section 2.1. Note Purchase; Amendment & Restatement .

(a) Subject to the terms and conditions hereof, on the Closing Date Company shall issue to Holders, and each Holder shall purchase from Company (so long as all conditions precedent required hereby shall have then been satisfied), a Note or Notes in an aggregate principal amount equal to the such Holder’s Percentage Share of the Commitment on the Closing Date at which time Holders shall make an advance on the Notes in accordance with their respective Percentage Shares in the aggregate amount of $5,200,000. As described in subsection (c) below, the Existing Obligations in the principal amount of $16,500,000 together with accrued interest and other amounts due and owing thereunder shall be deemed to be renewed and extended Indebtedness of Company, and Loans to Company under the Notes, in accordance with Holders’ respective Percentage Shares. The Loans described in this subsection (a), including such renewed and extended Existing Obligations, shall be considered parts of a single Borrowing of $21,700,000.

(b) Subject to the terms and conditions hereof, Holders agree to make additional advances to Company (so long as all conditions precedent required hereby shall have been satisfied) on the Notes in accordance with their respective Percentage Shares from time to time during the Availability Period; provided , the aggregate amount of all Borrowings from any Holder shall not exceed the Commitment of that Holder. The aggregate amount of all Loans in any Borrowing must be greater than or equal to $2,500,000 (or any smaller amount that may be approved from time to time by Administrative Agent) or any higher integral multiple of $500,000 or must equal the amount of the remaining aggregate Commitments.

[Note Purchase Agreement]

(c) This Agreement and the Notes amend and restate in their entirety (but do not novate or extinguish) the Existing Note Purchase Agreement and promissory notes included in the Existing Credit Documents, and from and after the date hereof, the terms and provisions of such loan agreements and promissory notes shall be superseded by the terms and provisions hereof and of the Notes, respectively. Company acknowledges and agrees that (i) the Existing Obligations, and all accrued and unpaid interest thereon, shall be deemed to be renewed and extended Indebtedness of Company outstanding under and governed by this Agreement and evidenced by the Notes, and (ii) all Liens securing the Existing Obligations shall continue in full force and effect to secure the Obligations and be evidenced and governed by the Security Documents. On the Quarterly Payment Date of September 27, 2007, Existing Borrower failed to pay accrued interest in respect of the Loans in the aggregate amount of $590,868.06, and Company hereby agrees to pay to Administrative Agent for the account of the Holders $250,000 of such interest on the date hereof and the remaining balance on or before November 21, 2007.

Section 2.2. The Notes . The obligation of Company to repay to each Holder the aggregate amount of all Loans made by such Holder, together with interest accruing in connection therewith, shall be evidenced by a single Note made by Company payable to the order of such Holder in the form of Exhibit A with appropriate insertions. The amount of principal owing on any Holder’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Holder minus all payments of principal theretofore received by such Holder on such Note. Interest on each Note shall accrue and be due and payable as provided herein. Each Note shall be due and payable as provided herein, and shall be due and payable in full on the Maturity Date. Company may not borrow, repay, and reborrow hereunder or under the Notes.

Section 2.3. Requests for New Loans . Company must give to Administrative Agent written or electronic notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of new Loans to be advanced by Holders. Each such notice constitutes a “Borrowing Notice ” hereunder and must:

(a) specify the aggregate amount of any such Borrowing of new Loans and the date on which such Loans are to be advanced; and

(b) be received by Administrative Agent not later than 10:00 a.m., New York, New York time, on the tenth (10 ^th ) Business Day preceding the day on which any such Loans are to be made.

Each such written request or confirmation must be made in the form and substance of the “Borrowing Notice” attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Company as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Holder prompt notice of the terms thereof. If all conditions precedent to such new Loans have been met, each Holder will on the date requested promptly remit to Administrative Agent at Administrative Agent’s office in Los Angeles, California the amount of such Holder’s new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Loans available to Company. The failure of any Holder to make any new Loan to be made by it hereunder shall not relieve any other Holder of its obligation hereunder, if any, to make its new Loan, but no Holder shall be responsible for the failure of any other Holder to make any new Loan to be made by such other Holder.

[Note Purchase Agreement]

Section 2.4. [Reserved] .

Section 2.5. Use of Proceeds . Company will use the proceeds of the Loans made on the Closing Date: (a) up to $800,000 to consummate the Acquisition, (b) to make a loan to GO in the amount of $2,200,000 pursuant to the GO Note, (c) up to $250,000 to pay accrued and unpaid interest in respect of the Existing Notes, (d) to pay the $1,950,000 Amendment and Reconveyance Fee described in Section 12.16, and (e) to pay closing expenses, costs and fees. The proceeds of the Loans made after the Closing Date shall be applied by Company to implement the Approved Plan of Development and to make other expenditures from time to time approved by Required Holders. In no event shall the funds from any Loan be used directly or indirectly by any Person (x) to fund Excess Drilling & Completion Costs, (y) for personal, family, household or agricultural purposes, or (z) for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock.

Section 2.6. Interest Rates and Fees; Payment Dates .

(a)  Interest Rates . Subject to subsection (b) below, each Loan shall bear interest on each day outstanding at the Fixed Rate compounded quarterly on each Quarterly Payment Date to the extent not paid.

(b)  Default Rate . If an Event of Default shall have occurred and be continuing under Section 9.1(a), (b), (k)(i), (k)(ii), or
(k)(iii), all outstanding Loans shall bear interest at the Default Rate. In addition, if an Event of Default shall have occurred and be continuing (other than under Section 9.1(a), (b), (k)(i), (k)(ii), or (k)(iii)), Required Holders may, by notice to Company, elect to have the outstanding Loans bear interest at the Default Rate, and upon the giving of such notice, such Loans shall bear interest at the Default Rate until the earlier of (i) the first date thereafter upon which there shall be no Event of Default continuing and (ii) the date upon which Required Holders shall have rescinded such notice.

(c)  Commitment Fees . In consideration of each Holder’s commitment to make Loans, Company will pay to Administrative Agent (for the account of the Holders in accordance with their respective Percentage Shares) a commitment fee determined on a daily basis by applying the Commitment Fee Rate to the aggregate Unused Commitment Amount determined as of the end of each day during the Availability Period. This commitment fee shall be due and payable in arrears on each Quarterly Payment Date for the preceding ANCF Quarter.

(d)  Up-Front Payment . In consideration of each Holder’s commitment to make Loans, Company will pay to Administrative Agent (or its designee or designees) an up-front payment equal to 1.5% of the aggregate amount of any increase in the Commitments (payable on a date that is prior to or concurrent with the effective date of any such increase). Payment of such payment shall be by wire transfer of immediately available funds or upon the instruction of Company, by deduction from the purchase price of the Notes.

[Note Purchase Agreement]

Section 2.7. Collateral Account .

(a)  Establishment of Collateral Accounts; Rules for Application .

(i) Company shall establish and maintain at its expense the Collateral Account pursuant to the Collateral Account Agreement.

(ii) Company shall deposit or cause to be deposited into the Collateral Account all Gross Cash Revenues from and after the Closing Date through the Maturity Date or, if later, the date when all Obligations are paid in full. In addition, Company shall deposit all funds into the Collateral Account from the Borrowing on the Closing Date that are not applied under clauses (a) or (c) of the first sentence of Section 2.5 until such funds may be applied to the development of Oil and Gas Properties comprising part of the APOD pursuant to clause (b) of such sentence.

(iii) Except as provided in clause (v) below, all amounts in the Collateral Account shall be applied to the following purposes in the following order or priority:

(A) Direct Taxes and Royalties;

(B) ANCF LOE and ANCF Transportation Costs;

(C) Fees and expenses under the Note Documents;

(D) Accrued and unpaid interest on the Notes and accrued unpaid commitment fees under Section 2.6(c);

(E) ANCF Overhead Costs;

(F) ANCF Capital Expenditures;

(G) Payments of principal on the Notes as required hereunder; and

(H) Permitted ANCF Distributions.

(iv) Prior to its receipt of a Notice of Exclusive Control (defined below), Company may instruct the administrator of the Collateral Account to transfer or disburse amounts from it to Company’s operating account from time to time for use in the ordinary course of its business, subject to the terms and provisions of this Agreement, including the priority of payment provisions specified in subsection (a)(iii) above. Administrative Agent may at any time determine to exercise exclusive dominion and control over the Collateral Account, and, upon receipt of notice from Administrative Agent of such determination (a “ Notice of Exclusive Control ”), Company shall cease giving the instructions described in the preceding sentence to the administrator of the Collateral Account. During the time when a Notice of Exclusive Control is in effect, Administrative Agent shall, subject to the provisions of subsection (a)(v) below, transfer or disburse amounts from the Collateral Account to Company’s operating account (or, in Administrative Agent’s discretion, directly to the Persons entitled to receive payment of such amounts) from time to time for use in the ordinary course of Company’s business, subject to the terms and provisions of this Agreement, including the priority of payment provisions specified in subsection (a)(iii) above.

[Note Purchase Agreement]

(v) After the occurrence of an Event of Default under any Note Document or Company’s failure to comply with the terms of this Section 2.7, Administrative Agent may, at its option, from time to time apply all sums in the Collateral Account to the reduction of outstanding principal, interest and other sums owed by Company on, the Notes or other Note Documents.

(vi) Upon the satisfaction in full of all amounts owed by Company under the Note Obligation Documents, Administrative Agent shall have all amounts remaining in the Collateral Account disbursed to Company.

(b)  Notice . Not later than 5 Business Days after the date hereof and at all times thereafter, Restricted Persons shall send a notice, in form satisfactory to Administrative Agent, to all existing and/or new purchasers of Hydrocarbons produced from the Eligible Mortgaged Properties and/or other Persons making payments to Restricted Persons in respect of their oil and gas business, directing them to forward all amounts payable to Restricted Persons directly to the Collateral Account at the mailing address of the depositary bank for deposit into the Collateral Account (or alternatively, by wire transfer directly into the Collateral Account). The failure of such purchasers to comply with any such notice shall not constitute a Default hereunder by any Restricted Person, provided that (i) such purchaser’s failure to comply with such notice is not done at the request of a Restricted Person and (ii) Company or Company’s Affiliate shall forward all amounts received from such purchaser to the Collateral Account within one (1) Business Day of Company’s or Company’s Affiliate’s receipt thereof.

(c)  Acknowledgments . Company hereby acknowledges that:

(i) It has granted and assigned to Administrative Agent a first priority, perfected security interest in the Collateral Account, all funds therein and all proceeds thereof pursuant to the Collateral Account Agreement; and

(ii) Company shall not be permitted to withdraw, transfer or disburse any funds from the Collateral Account except in accordance with the terms hereof, the Collateral Account Agreement and each other Note Document.

(d)  Attorney-in-fact . Company hereby appoints Administrative Agent its attorney-in-fact, with full power of substitution, to execute and file on behalf of Company, any financing statement, continuation statement or instrument of further assurance to more effectively perfect, continue or confirm (i) the provisions of this Section 2.7 and of any agreement entered into by Company, Administrative Agent and the depositary bank administering the Collateral Account and (ii) the security interest granted in the Collateral Account. This power, being coupled with an interest, shall be irrevocable until all amounts due in connection with the Notes have been paid in full.

[Note Purchase Agreement]

Section 2.8. Mandatory Prepayments & Note Exchange .

(a) On each Quarterly Payment Date beginning with December 29,2008 and on each Quarterly Payment Date thereafter, to and including the Quarterly Payment Date immediately preceding the Maturity Date, Company shall make a principal payment in respect of the Notes in an aggregate amount equal to the greater of (i) (x) the Dedication Rate multiplied by the Adjusted Net Cash Flow for the ANCF Quarter applicable thereto, minus (y) the Permitted ANCF Distribution, if any, permitted to be made by ECO on such Quarterly Payment Date, and (ii) the Minimum Scheduled Quarterly Principal Payment. If any principal or interest amount payable under the Notes remains outstanding at the Maturity Date, such amount will be paid in full by Company to the Holders in immediately available funds on the Maturity Date.

(b) If the Required Holders shall, in their sole and absolute discretion, approve the sale of any Collateral requested by a Restricted Person, Company shall make a payment in respect of the Notes in an aggregate amount equal to the sales proceeds received by such Restricted Person net only of reasonable out-of-pocket costs of such sale paid to non-Affiliates of Company.

(c) Company has requested a Loan from Holders in order to finance the payment of the Amendment and Reconveyance Fee, as defined and described in Section 12.16, and the interest payment described in Section 2.5 in the aggregate principal amount of $2,250,000 (the “ Demand Loan ”). At any time and from time to time during the period commencing on May 19, 2008 through and including November 19, 2009 (the “ Demand Period ”), Administrative Agent may, in the exercise of its sole discretion, demand in writing that Company repay all or any portion of the outstanding principal amount of the Demand Loan, together with all interest then accrued and unpaid on the principal so prepaid (a “ Demand Notice ”). The principal amount of the Demand Loan to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day) in the Demand Notice, together with interest on such principal amount accrued to such date; provided that such date fixed for prepayment shall not be earlier than ninety (90) days after the delivery of such Demand Notice.

(d) Company hereby acknowledges that Parent has granted Holders the right to exchange all or any portion of the Loans evidenced by the Notes for Equity of Parent, upon the terms and as provided in the Warrant. Upon giving effect to any such exchange, the outstanding principal amount of the Loans shall be reduced to the extent of any such exchange, and, upon the written request of Company, Administrative Agent will confirm the outstanding principal balance of the Loans after giving effect to any such exchange.

(e) In the event that Company receives any payments of principal in respect of the GO Note (a “ GO Principal Payment ”), it shall immediately make a principal payment in respect of the Notes in an aggregate amount equal to such GO Principal Payment.

[Note Purchase Agreement]

Section 2.9. Optional Prepayments .

(a) Company may, upon not less than thirty and not more than forty-five days’ notice to Administrative Agent in the form of a Prepayment Notice, prepay on any Quarterly Payment Date all or any part of the Notes, without premium or penalty, at 100% of the principal amount so prepaid, provided that any partial payment on the Notes must not be less than $2,500,000 in the aggregate for all Notes then outstanding. Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

(b) In the case of each prepayment of Notes pursuant to this Section 2.9, the principal amount of each Note to be prepaid shall mature and become due and payable on the Quarterly Payment Date fixed for such prepayment, together with interest on such principal amount accrued to such date. From and after such date, unless Company shall fail to pay such principal amount when so due and payable, together with the interest, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

(c) Any principal prepaid pursuant to this Section 2.9 shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Note Documents at the time of such prepayment. Any such prepayments hereof shall be applied first, to accrued but unpaid interest on the Notes, and second, to outstanding principal on the Notes until paid in full. No prepayment on the Notes shall, until the Notes have been paid in full, have the effect of reducing the mandatory prepayments required under Section 2.8.

Section 2.10. Financing Arrangements . Regardless of whether the Loans have been paid or prepaid in full, prior to the expiration of the Availability Period neither Company nor any Affiliate of Company or any equity holder of Company shall seek or obtain any financing to acquire any Oil and Gas Properties in the Project Area or fund any development of Oil and Gas Properties in the Project Area from any source other than TCW or an Affiliate of TCW.

ARTICLE III — Payments to Holders

Section 3.1. General Procedures . Company will make each payment which it owes under the Note Documents to Administrative Agent for the account of the Person to whom such payment is owed, in lawful money of the United States of America, without set-off, deduction or counterclaim, and in immediately available funds. Each such payment must be received by Administrative Agent not later than 10:00 a.m., New York, New York time, on the date such payment becomes due and payable. Any payment received by Administrative Agent after such time will be deemed to have been made on the next following Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest, interest shall accrue and be payable thereon for the period of such extension as provided in the Note Document under which such payment is due.

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Each payment under a Note Document shall be due and payable at the place set forth for Administrative Agent on the Holders Schedule. When Administrative Agent collects or receives money on account of the Obligations, Administrative Agent shall distribute all money so collected or received, and each Holder Party shall apply all such money so distributed, as follows:

(a) first, for the payment of all Obligations which are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due Administrative Agent under Section 7.9 or 12.4 and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as Holder Parties shall otherwise agree);

(b) then for the prepayment of amounts owing under the Note Documents (other than principal of the Loans) if so specified by Company;

(c) then for the prepayment of principal of the Loans, together with accrued and unpaid interest on the principal so prepaid; and

(d) last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on any Note shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Section 2.6. All distributions of amounts described in any of subsections (b), (c) or (d) above shall be made by Administrative Agent pro rata to each Holder Party then owed Obligations described in such subsection in proportion to all amounts owed to all Holder Parties which are described in such subsection; provided that if any Holder then owes payments to Administrative Agent under Section 11.4, any amounts otherwise distributable under this section to such Holder shall be deemed to belong to Administrative Agent to the extent of such unpaid payments, and Administrative Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Holder.

Section 3.2. Payment of Interest . On each Quarterly Payment Date, Company shall pay the interest then accrued on the Loans in full in immediately available funds.

Section 3.3. Place of Payment . Payments becoming due and payable on the Notes and under the other Note Documents shall be made in New York, New York at Administrative Agent’s offices located at 200 Park Avenue, Suite 2200, New York, New York 10166 or, at the election of Administrative Agent, by wire transfer to a bank and account located in the State of New York specified by Administrative Agent. Administrative Agent may at any time, by notice to Company, change the place of payment of any such payments so long as such place of payment shall be in the State of New York.

Section 3.4. Capital Reimbursement . If either (a) the introduction or implementation after the date hereof of or the compliance with or any change after the date hereof in or in the interpretation of any Law regarding capital adequacy, or (b) the introduction or implementation after the date hereof of or the compliance with any request, directive or guideline issued after the date hereof from any central bank or other Governmental Authority (whether or not having the force of Law) regarding capital requirements has or would have the effect of reducing the rate of return on any Holder Party’s capital, or on the capital of any corporation controlling such Holder Party, as a consequence of the Loans made by such Holder Party, to a level below that which such Holder Party or such corporation could have achieved but for such change (taking into consideration such Holder Party’s policies and the policies of any such corporation with respect to capital adequacy), then from time to time Company will pay to Administrative Agent for the benefit of such Holder Party, within 3 Business Days of demand therefore by such Holder Party, such additional amount or amounts which such Holder Party shall determine to be appropriate to compensate such Holder Party for such reduction.

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Section 3.5. Reimbursable Taxes . Company covenants and agrees that:

(a) Company will indemnify each Holder Party against and reimburse each Holder Party for all present and future income, stamp and other taxes, levies, costs and charges whatsoever imposed, assessed, levied or collected on or in respect of this Agreement or any Loans (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, (i) taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which it is organized or otherwise resides for tax purposes or maintains the office, branch, or agency through which it administers this Agreement, (ii) with respect to each Holder Party, taxes imposed by reason of any present or former connection between such Holder Party and the jurisdiction imposing such taxes, other than solely as a result of this Agreement or any Note or any transaction contemplated hereby, and (iii) any United States withholding tax imposed on any payment by Company pursuant to this Agreement or under any Loans, but not excluding any portion of such tax that exceeds the United States withholding tax which would have been imposed on such a payment to such Holder Party under the laws and treaties in effect when such Holder Party first becomes a party to this Agreement (all such non-excluded taxes, levies, costs and charges being collectively called “ Reimbursable Taxes ”). Such indemnification shall be on an after-tax basis and paid within 3 Business Days after a Holder Party makes demand therefor.

(b) All payments on account of the principal of, and interest on, each Holder Party’s Loans and Note, and all other amounts payable by Company to any Holder Party hereunder, shall be made in full without set-off or counterclaim and shall be made free and clear of and without deductions or withholdings of any nature by reason of any Reimbursable Taxes, all of which will be for the account of Company. In the event of Company being compelled by Law to make any such deduction or withholding from any payment to any Holder Party, Company shall pay on the due date of such payment, by way of additional interest, such additional amounts as are needed to cause the amount receivable by such Holder Party after such deduction or withholding to equal the amount which would have been receivable in the absence of such deduction or withholding. If Company should make any deduction or withholding as aforesaid, Company shall within 60 days thereafter forward to such Holder Party an official receipt or other official document evidencing payment of such deduction or withholding.

(c) Notwithstanding the foregoing provisions of this section, Company shall be entitled, to the extent it is required to do so by Law, to deduct or withhold (and not to make any indemnification or reimbursement for) income or other similar taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of any Holder Party, other than a Holder Party (i) who is a U.S. person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with Administrative Agent (with copies provided to Company) for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if Company shall so deduct or withhold any such taxes, it shall provide a statement to Administrative Agent and such Holder Party, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which such Holder Party may reasonably request for assisting such Holder Party to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Holder Party is subject to tax.

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As used in this section, “Prescribed Forms” means such duly executed forms or statements, and in such number of copies, which may, from time to time, be prescribed by Law and which, pursuant to applicable provisions of (x) an income tax treaty between the United States and the country of residence of the Holder Party providing the forms or statements, (y) the Internal Revenue Code, or (z) any applicable rules or regulations thereunder, permit Company to make payments hereunder for the account of such Holder Party free of such deduction or withholding of income or similar taxes.

ARTICLE IV — Conditions Precedent to Lending

Section 4.1. Closing Date Conditions . The obligation of any Holder to make a Loan on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 12.1, of the following conditions on or before the Closing Date:

(a)  Closing Documents . Administrative Agent shall have received all of the following, duly executed and delivered and in form, substance and date satisfactory to Administrative Agent:

(i) This Agreement and any other documents that Holders are to execute in connection herewith.

(ii) Each Note.

(iii) each Security Document listed in the Security Schedule.

(iv) the Management Services Agreement.

(v) Certain certificates of Company including:

(A) An “Omnibus Certificate” of the Secretary and of the President (or equivalent representatives) of Company, which shall contain the names and signatures of the officers or representatives authorized to execute Note Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors (or other governing board) and in full force and effect at the time this Agreement is entered into, authorizing the execution of this Agreement and the other Note Documents delivered or to be delivered in connection herewith and the consummation of the transactions contemplated herein and therein, (2) a copy of the charter documents and all amendments thereto, certified by the appropriate official of the state of organization, and (3) a copy of any bylaws (or other equivalent documents); and

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(B) A “Compliance Certificate” of the Chairman of the Board or President (or equivalent representative) of Company, of even date with such Loan, in which such officer certifies to the satisfaction of the conditions set out in Section 4.2.

(vi) Certificate (or certificates) of the due formation, valid existence and good standing of Company in its state of organization, issued by the appropriate authorities of such jurisdiction, and certificates of Company’s good standing and due qualification to do business, issued by appropriate officials in any states in which Company owns property subject to Security Documents.

(vii) Documents similar to those specified in subsections (a)(iv)(A) and (a)(v) of this section with respect to each Guarantor.

(viii) Certificates or binders evidencing Restricted Persons’ insurance in effect on the date hereof.

(ix) Title opinions and other title information concerning the Project Area in form and substance satisfactory to Administrative Agent.

(x) A copy of each Acquisition Document, duly executed and delivered by each party thereto.

(xi) A solvency certificate of Company dated the Closing Date demonstrating that after giving effect to the consummation of the Closing Date Transactions and the Transaction Documents such Person is solvent.

(b)  Investment Committee Approval . The Investment Committee of TCW shall have approved the purchase of the Notes.

(c)  Collateral Account . Company shall have established the Collateral Account set forth in Section 2.7 hereof, and upon the funding of the initial Loans, Administrative Agent shall deliver such funds to the Collateral Account.

(d)  Organizational Structure . The organizational structure and capital structure of Company shall be as set forth in Schedule 5, which Schedule shall be in form and substance satisfactory to Administrative Agent in its sole and absolute discretion.

(e)  Insurance Report . The Holders shall have received and approved a certificate of insurance coverage of the Holder evidencing that the Holder is carrying insurance in accordance with Section 7.8.

(f)  Financial Statements . The Holders shall have received, in form and substance satisfactory to it, the pro forma opening financial statements and projections of Company demonstrating the ability of Company to (i) repay its debts, including the Obligations, and satisfy its other obligations when due and (ii) comply with the covenants contained in Articles VII and VIII hereof.

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(g)  Payment of Expenses . The Holders and their counsel shall have received all fees and other amounts due and payable on or prior to the Closing Date with respect to this Agreement, including, without limitation, fees and reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by Company hereunder or under each mandate or expense letter executed by Company or any Affiliate thereof.

(h)  Equity Contributions . Company shall have received from ECO $6,400,000, in cash, and 1,000,000 common units of Parent, in each case as a capital contribution to Company.

(i)  Closing Date Transactions . Administrative Agent shall have received a certificate of the president or chief financial officer of Company certifying that Company is concurrently consummating the Closing Date Transactions (with all of the material conditions precedent thereto having been satisfied in all material respects by the parties thereto) and acquiring all of the Oil and Gas Properties contemplated thereby.

(j)  Legal Opinions . Administrative Agent shall have received favorable opinions of Sprouse Shrader Smith P.C. and Kevin W. Finck, counsel for the Restricted Persons, Parent, General Partner, and Northport, in form and substance acceptable to Administrative Agent.

(k)  Completion of Proceedings . All corporate, partnership, limited liability company, and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request.

(1)  Due Diligence . Administrative Agent and Holders shall have completed satisfactory due diligence review of the assets, liabilities, business, operations and condition (financial or otherwise) of Company, including a review of its relevant Oil and Gas Properties and all legal, financial, accounting, governmental, environmental, tax and regulatory matters, and fiduciary aspects relevant to the financing under the Note Purchase Agreement.

(m)  Other Documentation . Administrative Agent shall have received all documents and instruments which Administrative Agent has then reasonably requested, in addition to those described in this Section 3.1. All such additional documents and instruments shall be reasonably satisfactory to Administrative Agent in form, substance and date.

(n)  No Default . No event shall have occurred and be continuing that would constitute an Event of Default or a Default.

Section 4.2. Additional Conditions Precedent . No Holder has any obligation to make any Loan (including its first) unless the following conditions precedent have been satisfied:

(a) All representations and warranties made by any Person in any Note Document shall be true in all respects on and as of the date of such Loan as if such representations and warranties had been made as of the date of such Loan, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.

[Note Purchase Agreement]

(b) All representations and warranties made by any party to the Acquisition Documents shall be true in all respects as of the Closing Date.

(c) No Default shall exist at the date of such Loan.

(d) No Material Adverse Change shall have occurred to, and no event or circumstance shall have occurred that could reasonably be expected to cause a Material Adverse Change to, Company’s Consolidated financial condition or businesses since the Closing Date.

(e) Each Restricted Person shall have performed and complied with all agreements and conditions required in the Note Documents to be performed or complied with by it on or prior to the date of such Loan.

(f) The making of such Loan shall not be prohibited by any Law and shall not subject any Holder to any penalty or other onerous condition under or pursuant to any such Law.

(g) Administrative Agent shall have received all documents and instruments which Administrative Agent has then requested, in addition to those described in Section 4.1 (including opinions of legal counsel for Restricted Persons and Administrative Agent; corporate documents and records; documents evidencing governmental authorizations, consents, approvals, licenses and exemptions; and certificates of public officials and of officers and representatives of Company and other Persons), as to (i) the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in this Agreement and the other Note Documents, (ii) the satisfaction of all conditions contained herein or therein, and (iii) all other matters pertaining hereto and thereto. All such additional documents and instruments shall be satisfactory to Administrative Agent in form, substance and date.

(h) Company shall have provided Administrative Agent with documentation and cost estimates demonstrating that the proceeds of such Loan will be applied by Company to implement the Approved Plan of Development as provided by the second sentence of Section 2.5, as requested by Administrative Agent and in form satisfactory to Administrative Agent in its sole and absolute discretion.

Section 4.3. Conditions Precedent to Company’s Obligations . The obligations of Company to issue the Notes under Section 2.1 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall not be effective against Holders if they do not consent thereto:

(a) All representations and warranties made by any Holder in Article VI shall be true in all respects on and as of the date of such Loan as if such representations and warranties had been made as of the date of such Loan, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.

[Note Purchase Agreement]

(b) There shall exist no action, suit, investigation, litigation or proceeding affecting any Holder, or any Affiliate of Holder or threatened before any court, governmental agency or arbitrator that purports to affect the legality, validity or enforceability of any Note Document delivered on the Closing Date or the consummation of the transactions contemplated thereby.

ARTICLE V — Representations and Warranties of Company

To confirm each Holder’s understanding concerning Restricted Persons and Restricted Persons’ businesses, properties and obligations and to induce each Holder to enter into this Agreement and to extend credit hereunder, Company represents and warrants to Administrative Agent and each Holder that:

Section 5.1. No Default . No Restricted Person is in default in the performance of any of its covenants and agreements contained in any Transaction Document. No seller under the Acquisition Documents is in default of any of its obligations to Company under any Acquisition Document or in breach of any of its representations and warranties to Company thereunder. No event has occurred and is continuing which constitutes a Default.

Section 5.2. Organization and Good Standing . Each Restricted Person is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary. Each Restricted Person has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable.

Section 5.3. Authorization . Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Transaction Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder. Company is duly authorized to borrow funds hereunder.

Section 5.4. No Conflicts or Consents . The execution and delivery by the various Restricted Persons of the Transaction Documents to which each is a party, the performance by each of its obligations under such Transaction Documents, and the consummation of the transactions contemplated by the various Transaction Documents, do not and will not (a) conflict with any provision of (i) any Law, (ii) the organizational documents of any Restricted Person, or (iii) any material agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Transaction Documents. Except as expressly contemplated in the Transaction Documents no permit, consent, approval, authorization or order of, and no notice to or filing with, any Governmental Authority or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Transaction Document or to consummate any transactions contemplated by the Transaction Documents. The Equity of MV Pipeline being pledged pursuant to the Security Documents is not subject to any restriction on the transfer, pledge, or voting of such Equity.

[Note Purchase Agreement]

Section 5.5. Enforceable Obligations . This Agreement is, and the other Transaction Documents when duly executed and delivered will be, legal, valid and binding obligations of each of the Restricted Persons and each of their respective Affiliates which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights.

Section 5.6. Initial Pro Forma Financial Statements . Once delivered pursuant to Section 7.23, the Initial Pro Forma Financial Statements will fairly present ECO’s Consolidated financial position at the effective time of the Acquisition and the Consolidated results of its operations and its Consolidated cash flows for the respective periods thereof.

Section 5.7. Other Obligations and Restrictions . No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which are, in the aggregate, material to Company or material with respect to Company’s Consolidated financial condition and not shown in the most recently delivered financial statements or disclosed in Section 5.7 of the Disclosure Schedule or which constitute Indebtedness and are otherwise permitted under Section 8.1. Except as shown in the Initial Pro Forma Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could reasonably be expected to cause a Material Adverse Change. Except as listed in Section 5.7 of the Disclosure Schedule, no Restricted Person has any Material Contracts (other than oil and gas leases, unit agreements, unit operating agreements, and joint operating agreements that are specifically listed on the property descriptions attached to the Mortgage).

Section 5.8. Full Disclosure . No certificate, statement or other information delivered herewith or heretofore to Administrative Agent by or on behalf of Company or any of its Affiliates in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact known to Company or its Affiliates (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein not misleading as of the date made or deemed made. No Material Adverse Change has occurred since the date of the first Borrowing. There is no fact known to Company or its Affiliates (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) that has not been disclosed to Administrative Agent in writing which could cause a Material Adverse Change. There are no statements or conclusions in any Engineering Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that each Engineering Report are necessarily based upon professional opinions, estimates and projections and that Company does not warrant that such opinions, estimates and projections will ultimately prove to have been accurate. Except for the Acquisition Documents and the GO Note, Company has no Material Contracts.

[Note Purchase Agreement]

Section 5.9. Litigation . Except as disclosed in the Initial Pro Forma Financial Statements or in Section 5.9 of the Disclosure Schedule: (a) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person or affecting any Collateral (including any which challenge or otherwise pertain to any Restricted Person’s title to any Collateral) before any Governmental Authority which could cause a Material Adverse Change, and (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Governmental Authority against any Restricted Person or any Restricted Person’s stockholders, partners, members, directors or officers or affecting any Collateral or any of its material assets or property which could cause a Material Adverse Change.

Section 5.10. Labor Disputes and Acts of God . Except as disclosed in Section 5.10 of the Disclosure Schedule, neither the business nor the properties of any Restricted Person has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could cause a Material Adverse Change.

Section 5.11. ERISA Plans and Liabilities . All currently existing ERISA Plans, if any, are listed in Section 5.11 of the Disclosure Schedule. Except as disclosed in the Initial Pro Forma Financial Statements or in Section 5.11 of the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA. Except as set forth in Section 5.11 of the Disclosure Schedule: (a) no “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (b) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than $500,000.

Section 5.12. Environmental and Other Laws . Except as disclosed in Section 5.12 of the Disclosure Schedule: (a) Restricted Persons are conducting their businesses in material compliance with all applicable Laws, including Environmental Laws, and have and are in compliance with all licenses and permits required under any such Laws; (b) none of the operations or properties of any Restricted Person is the subject of federal, state or local investigation evaluating whether any material remedial action is needed to respond to a release of any Hazardous Materials into the environment or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Materials; (c) no Restricted Person (and to the best knowledge of Company, no other Person) has filed any notice under any Law indicating that any Restricted Person is responsible for the improper release into the environment, or the improper storage or disposal, of any material amount of any Hazardous Materials or that any Hazardous Materials have been improperly released, or are improperly stored or disposed of, upon any Collateral; (d) no Restricted Person has transported or arranged for the transportation of any Hazardous Material to any location which is (i) listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, listed for possible inclusion on such National Priorities List by the Environmental Protection Agency in its Comprehensive Environmental Response, Compensation and Liability Information System List, or listed on any similar state list or (ii) the subject of federal, state or local enforcement actions or other investigations which may lead to claims against any Restricted Person for clean-up costs, remedial work, damages to natural resources or for personal injury claims (whether under Environmental Laws or otherwise); and (e) no Restricted Person otherwise has any known material contingent liability under any Environmental Laws or in connection with the release into the environment, or the storage or disposal, of any Hazardous Materials. Each Restricted Person undertook, at the time of its acquisition of each of its material properties, all appropriate inquiry into the previous ownership and uses of such properties and any potential environmental liabilities associated therewith.

[Note Purchase Agreement]

Section 5.13. Insurance . The Insurance Schedule contains an accurate and complete description of all material policies of property and casualty, liability, workmen’s compensation and other forms of insurance owned or held by or on behalf of any Restricted Person. Such policies constitute all policies of insurance required to be maintained under Section 7.8 hereof. All such policies are in full force and effect, all premiums due with respect thereto have been paid, and no notice of cancellation or termination in all material respects has been received with respect to any such policy. Such policies are sufficient for compliance in all material respects with all requirements of law and of all agreements to which any Restricted Person is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Restricted Persons; will remain in full force and effect through the respective dates set forth in the Insurance Schedule without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement and the other Note Documents.

Section 5.14. Names and Places of Business . No Restricted Person has, during the preceding five years, had, been known by, or used any other trade or fictitious name, except as disclosed in Section 5.14 of the Disclosure Schedule. Except as otherwise indicated in Section 5.14 of the Disclosure Schedule, the chief executive office and principal place of business of each Restricted Person are (and for the preceding five years have been) located at the address of Company set out in Section 12.3. Except as indicated in Section 5.14 of the Disclosure Schedule or otherwise disclosed in writing to Administrative Agent, no Restricted Person has any other office or place of business.

Section 5.15. Subsidiaries . Company does not presently have any Subsidiary except those listed in Section 5.14 of the Disclosure Schedule or disclosed to Administrative Agent in writing. No Restricted Person has any equity investments in any other Person except those listed in Section 5.14 of the Disclosure Schedule. Company owns, directly or indirectly, the equity interests in each of its Subsidiaries which is indicated in Section 5.14 of the Disclosure Schedule or as disclosed to Administrative Agent in writing.

Section 5.16. Government Regulation . Neither Company nor any other Restricted Person owing Obligations is (a) a “registered holding company”, or a “subsidiary company” of a “registered holding company”, or an “affiliate” of a “registered holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, (b) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or (c) subject to regulation under the Federal Power Act, as amended, or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.

[Note Purchase Agreement]

Section 5.17. Solvency . Upon giving effect to the issuance of the Notes, the execution of the Transaction Documents by the parties thereto and the consummation of the transactions contemplated hereby and thereby, Restricted Person will be solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws), and the sum of each Restricted Person’s absolute and contingent liabilities, including the Obligations or guarantees thereof, shall not exceed the fair market value of such Restricted Person’s assets, and (ii) each Restricted Person’s capital should be adequate for the businesses in which such Restricted Person is engaged and intends to be engaged. No Restricted Person has incurred (whether under the Note Documents or otherwise), nor does any Restricted Person intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature.

Section 5.18. Title to Properties; Licenses . Each Restricted Person has good and defensible title to, or valid leasehold interests in, all of the Collateral owned or leased by such Restricted Person and all of its other material properties and assets necessary or used in the ordinary conduct of its business, free and clear of all Liens, encumbrances, or adverse claims other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person’s business. Each Engineering Report at any time delivered pursuant to Section 7.2(i) correctly states the working interests and net revenue interests of the Restricted Persons in the Proved Reserves that are the subject of such Engineering Report. Except for obligations to contribute a proportionate share of the costs of defaulting co-owners, no Restricted Person is obligated to bear any percentage share of the costs and expenses relating to the drilling, development and production of such Proved Reserves in excess of such working interests, and (subject to the Note Documents) each Restricted Person is entitled to receive percentage shares of the revenues from the production of such Proved Reserves that are at least equal to such net revenue interests. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) that are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property. No Restricted Person has granted control over any Deposit Accounts to any Person, other than Administrative Agent and the bank with which any Deposit Account is maintained. No Restricted Person has any “securities accounts” as defined and described in the UCC.

Section 5.19. Regulation U . None of Company, Parent, nor any of their Subsidiaries are engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loans will be used for a purpose which violates Regulation U.

[Note Purchase Agreement]

Section 5.20. Leases and Contracts; Performance of Obligations . The leases, deeds, and other agreements comprising part of the Acquisition or forming a part of the Oil and Gas Properties of the Restricted Persons to which Proved Reserves are attributed in each Engineering Report are in full force and effect. To the best knowledge of Restricted Persons after due inquiry, all rents, royalties and other payments due and payable under such leases, deeds, and other agreements have been properly and timely paid other than to the extent such could not reasonably be expected to cause the loss or forfeiture of any such Proved Reserves. No Restricted Person is in default with respect to its obligations (and no Restricted Person is aware of any default by any third party with respect to such third party’s obligations) under any such leases, deeds, and other agreements, or under any Permitted Liens, or otherwise attendant to the ownership or operation of any part of the Oil and Gas Properties, where such default could adversely affect the ownership or operation of any Oil and Gas Properties to which any such Proved Reserves are attributed. No Restricted Person is currently accounting for any royalties, or overriding royalties or other payments out of production, o